Please tell me that John Barrie, a tax lawyer with Bryan Cave LLP in New York, is mistaken when he says that Matt Murphy will owe Federal income taxes based on catching Barry Bond's 756th homerun hit baseball, EVEN IF Murphy DOES NOT SELL IT, but rather simply keeps it in his posession. How in the world, if he doesn't sell it, nor rent it out, would he owe income based on his possession of it? What if, two months from now, he threw it in the trash? Would he still owe taxes on his two month possession of it? I own an old baseball cap. If tomorrow it becomes publicly known that the cap had belonged to Hank Aaron, would I suddenly owe Federal income taxes?
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Moderator: Mr. Barrie's opinion is news to me. But then I only know what I read here.
I'd pay little attention to him. Further along in his (AP) quote he says that when the ball is finally sold, cap gain tax would be due as well. Regardless of the initial tax, which I disagree with, any change in value would be taxed at
28% as a collectable not cap gain rate. Mr Barrie's claim would suggest that few people would ever be able to catch such a ball and keep it, I, for one, don't have $200K easily available to cut a check to the IRS. This is not like winning a prize on a game show, tax is due on the sale of the ball. But he did get quite the press coverage from his remark. JOE
Mr. Barrie is correct. If Matt Murphy (or you) found $5,000 in cash or $100,000 worth of buried treasure or a baseball worth $500,000 he would have taxable income.
Yes.
Yes.
No, because that's a different situation. An increase in value of something you already own doesn't create taxable income until you sell it or otherwise dispose of it in a taxable transaction. All that said, the guy who retrieved Mark McQuire's 62nd homerun ball wasn't required to pay income tax on his accession to wealth nor gift tax when he gave that ball to Mark.
Because he obtained something of value. I would argue it was a "gift", as it fell from the skies. As I recall on the last "homerun" ball, the Service decided not to tax the person who ended up with it.
Perhaps he thinks it's analogous to a game show - if you go on one of those shows and win a car, it's taxable when you get it, even if you don't sell it or otherwise get cash. Another situation that might be more analogous, though, is a lottery. Let's say you buy one of those $100 tickets for a house someone is using a lottry to sell, a bit at a time. If your ticket is the winner, do you have taxable income for the value of the house, or do you get it with a basis of $100? Stu
I wouldn't go to that tax lawyer. Murphy has a baseball. If I find a winning lottery ticket on the street; but I don't cash it, I don't have taxable income; I have a piece of paper.
If the ball was lost or abandoned and the finder has undisputed possession of it, it is taxable as ordinary income, otherwise known as "treasure trove". If he returns it to the owner (major league baseball franchise) then it's not taxable. It's no different than a pile of unclaimed cash found in the street, except there is more room for subjective determination of the taxable value. Our moderator and others contributed to a thread back in
1998 (which is hard to find in Google archives due to some kind of Google error) on this exact same topic, and similar threads can be found as well. Some support appears there for the following position, if I understand correctly: if the possessor of the ball was engaged in a hobby of snagging home run balls, it would not be immediate treasure trove income, but income only upon future sale (asset with a basis of zero dollars). This might allow for lower capital gains tax rather than ordinary tax. So, if someone habitually sat in a kayak in San Francisco's McCovey Cove outside of the Giant's ballpark during home games, maybe the ball he found would not be considered treasure trove.
See above. It's the tax law. If you find and keep a pile of cash but don't spend it, it's still taxable income.
If it was an accident, and not willful negligence or simply lost property, it could be deductible as a casualty loss subject to all limitations. If the family dog chewed it up or he threw it out because he didn't have his glasses on and thought it was a different ball, then no.
Public knowledge is irrelevant to taxability, but perhaps relevant to determining fair market value. There are three possible income tax events: acquisition of the cap (purchase or gift - not taxed, treasure trove = taxed), gain or loss if and when you sell it, and casualty loss if there is a casualty or theft.
The IRS has never taken a position on this issue other than to allow it to be treated as a capital gain upon sale. In
1998, then-Commissioner Charles Rossotti confirmed this position with regards to Mark McGwire's 62nd home run ball. Since then Congress has not changer the Internal Revenue Code with regards to this. While there is definitely merit to the position that wealth acquired by simply being in the right place at the right time should be taxed as ordinary income, that is not the current position of either the Congress of the United States or the Internal Revenue Service when it comes to historic baseballs. Dick
On further reflection I have to disagree. First of all it doesn't meet the definition of a gift - given out of detached generosity. Bonds didn't hit the ball into the stands because he wanted to do something nice for someone else without any ulterior motive. Further to me it seems similar to the same situation when Oprah when she gave away those cars. She deducted the cost of the cars, showing it was a business expense and not a gift. So the recipients were taxed. Unlike a game show they didn't do anything in exchange, they were just in the right place at the right time. Are you telling me that the Giants or MLB or whoever is responsible for paying for those balls, is not going to deduct its cost when calculating their income?
Just because they decide not to tax something doesn't mean that it isn't taxable under the Code. Mileage points earned by employees (as opposed to the business that paid for them) for business travel are technically taxable. But the IRS has never wanted to step into that issue because it would cause a huge political problem. Stu
I don't think these situations are comparable. You go on a game show or buy a lottery ticket with the express purpose of winning a prize. You go to a baseball game to watch the game, not win anything. If you catch a home run ball it's completely accidental. What if the guy hit it out of the park, and someone who happens to be on the street catches it. He didn't even buy a ticket or enter the park, so it could hardly be analogous to either of those situations. But if taxes are due on the acquisition of the famous ball, I presume he would owe them just the same as someone inside the park.
-- Barry Margolin, snipped-for-privacy@alum.mit.edu Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
In another tax forum, it has been suggested the ball had almost no value when caught, but a few moments later when the umpire ruled it to be a home run, it then acquired value. For example, if the ball had been hit close to the foul line, and caught, until the umnpire ruled it fair, its value could not be said to be very much. Had it been ruled foul, its value would have been very low.
But the ruling in each case would have been subsequent to its catch.
Um, 28% is the L-T capital gain rate on collectibles.
But of more interest is that collectibles is defined by statute and is gold and silver coins, stamps, works of art, ... and other items as enumerated by the Secretary, or similar language. The Secretary has never ruled that baseballs are Collectibles for the purpose of this statute, and given the prior flap when Rosetti was IRS Commisioner, is not likely to. Ever. So while intuitively it might seem that a record setting baseball might be a collectible, it is not.
Did the people who were given cars by Oprah go to see her show for that purpose? My recollection is that they didn't. But they were taxed on it anyway.
I think someone else mentioned the concept of treasure trove. I only was able to find one case dealing with the issue of property that is fortuitously found. That case upheld treasure regulations to the effect that treasure trove (such as a valuable baseball that just happens to fall into your lap) is taxable gross income. The fact that the IRS may not have gone after this kind of thing in the past does not mean it's not taxable under the law - just that for whatever political reason they decided not to go after them. It's sort of like with frequent flyer miles received by individuals for business travel. Technically they are income to the employee and should be taxed. But the IRS hasn't wanted to do something that would harm a program that too many people like. Stu
Cash, yes. If I found $50,000 worth of gold buried in my backyard, I wouldn't owe any taxes until I sold it. If I grow $1,000 worth of tomatoes in my back yard, I don't owe any taxes unless I sell them. Seth
And the tax they paid was on the amount she paid for the cars, right?
I don't think the guy who caught it would mind if he were taxed on the amount MLB paid for the ball. (For that matter, *when* did it become a homerun? If he caught it before the umpire ruled, it wasn't worth much, but increased in value while he owned it.) Seth
You know, they have a quaint custom at Wrigley Field in Chicago. Any home run ball hit by a player on an opposing team is tossed back onto the field, the theory being that it just ain't worth anything, whereas one hit by a Cubs' player would be. That of course would solve everything.
ChEAr$, Harlan
Moderator: Ah, the Wrigley Graveyard - where dreams are buried. At each entrance should be a sign with Dante's passage: "Abandon all hope, ye who enter here."
Kaye Thomas does not agree. In the (inevitable) thread on this topic in his Fairmark forum, he wrote the following.
"It may seem obvious that it is a collectible, but this term has a specific definition that lists various items (stamps, coins, antiques, etc.) and then says any other item so designated by the Secretary of the Treasury. You might assume they came out with some kind of general catch-all for items like this, but I'm not aware of any such authority. Sports memorabilia certainly would qualify as a collectible in the usual sense of the word, but it isn't within the tax law definition. If the fan can qualify for long-term capital gain, I believe the correct rate is 15%."
Quoted from the 7th post in the thread at the following link.
But are they going to deduct the cost of the ball (under $100, I assume), like any other home run or foul ball that isn't returned, or the value of the ball as a collectible (thousands of dollars)? Presumably the fan would be taxed on the latter amount. It's not a zero sum game.
-- Barry Margolin, snipped-for-privacy@alum.mit.edu Arlington, MA
*** PLEASE don't copy me on replies, I'll read them in the group ***
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