Re: Why is catching a baseball taxable income?

>> snipped-for-privacy@panix.com (Seth) wrote:
>>>> The retriever says "according to my morality, the ball >>>> belongs to Hank, so I returned it to him." No taxable >>>> event. > Then Commissioner Charles Rossotte agreed (in practice). >>> In practice, no, but in theory there would be two taxable >>> events. The fan has taxable income as treasure trove in the >>> value of the baseball. Then the fan also has gift tax. > Then Commissioner Charles Rossotte disagreed (in practice). >> So I find something, and return it to the owner (possibly >> after a court tells me to). > >> Then the IRS comes along and declares that I didn't have to, >> that it was actually my property, and suddenly I'm on the >> hook for income and gift taxes? > If you read either Pub 17 or Pub 525, you will find: > "Found property. > If you find and keep property that does not belong to > you that has been lost or abandoned (treasure-trove), > it is taxable to you at its fair market value in the > first year it is your undisputed possession." > > On the basis of that, I have consistently written that > the ball is taxable in the current year, but that has > not been the IRS position. > > It should be noted that the FMV of the baseball in > question decreases with each homerun Bonds hits. > Before Homerun #756 was hit, someone offered $3M > for it, but rescinded the offer because of the > mayhem the offer might have incited. Now I am > reading figures in the area of 500K. > > What is the FMV of either #755 or #757? > > Keep in mind that Tax Court judges have heard a plethora > of nonsense arguments and some judges have developed a > low tolerance for them.

I haven't read this whole thread, so I don't know the distribution of opinions, but here's mine FWIW: Reg. Sec. 1.61-14(a) says "Treasure trove, to the extent of its value in United States currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession." The term "trove" comes from the French "trouver," to find, so it literally means "treasure found." Black's Law Dictionary defines "treasure trove" as "valuables (usu. gold or silver) found hidden in the ground or other private place, the owner of which is unknown; at common law, the finder of a treasure trove was entitled to title against all except the true owner." IRS Pub 17 (and Pub. 525) state:

"Found property.

If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is in your undisputed possession." So, is the ball treasure trove? I'd argue that it is not. It was never lost or abandoned, it was not hidden, and there never was any question as to who owned it. No doubt Major League Baseball, or one of the teams, bought and paid for the ball and owned it before it was hit into the stands. The owner of the ball gave it to the young man who caught it with pure donative intent. He didn't perform any service to earn it. He didn't find it; it was never lost. It's a gift, not taxable. I heard someone on an NPR program a while back say that they had asked four different tax experts whether the ball was taxable income, two said yes, and two said no. We have a similar result here: some say yes, some say no. I'd argue no, but I'm not sure I'd win the argument in court. Clearly if the young man had bought the ball, brought it to the park, loaned it to the pitcher, and Barry Bonds hit it out of the park, the ball would have appreciated in value, but he would have no taxable income until he sold or exchanged it. However, he probably has more use for half a million dollars than he does for a collectible baseball. Which is really why he is auctioning it off. Katie in San Diego

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