Why is catching a baseball taxable income?

It might be.

That would be a treasure trove.

If it was just a big raw nugget, it wouldn't be.

Seth

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? Seth

Not to add fuel to the fire, but there's an AP piece today indicating the fellow is going to auction off the ball (Expecting roughly $0.5m) because he's been advised he now owes taxes immediately and he doesn't have the $$ to cover that without selling the ball.

From the dispatch dated 8/21/2007

"Murphy, ... eventually decided to sell the ball when itbecame clear that the cost of keeping it would be too muchto bear. Advisers informed him he would be taxed on the balljust for holding on to it.

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------------------------------------------------------------- Regards -

- Andrew

The latest word is the guy is going to split the proceeding with a friend of his attending the game. Does this trigger a gift tax plus a gains tax (possibly short term gains)? The possible escape from gift tax is a loose "oral contract" that they talked about doing this in advance. The IRS still gets a hefty cut anyways. This issue comes up with lottery winners. Then all the agreed sharers sign the winning ticking as the contract.

Then Commissioner Charles Rossotte agreed (in practice).

Then Commissioner Charles Rossotte disagreed (in practice).

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 Before Homerun #756 was hit, someone offered $3M for it, but rescinded the offer because of the mayhem the offer might have incited.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.

Dick

No, that's not the same case. The batter was never the owner of the baseball. Either the team of MLB was the owner. And if they have a policy of allowing fans to own baseballs they catch, that's part of their business model and becomes (if known by the fans) part of their contract with the fans. So the fan becomes the owner when he catches the ball. If you find something that isn't yours and return it to the true owner, it never was yours and so you have neither income tax nor gift tax.

In theory, yes. In practice, I doubt it.

Stu

Maybe his tax advisor has been reading this group, but wasn't convinced by the "might not touch all the bases" theory. Stu

Whack! Whack! Whack! Come on horse - get up, your not quite dead yet! Why does the catcher own the ball? As another poster said - because of tradition the person who caught the ball is allowed to go home with it. He didn't buy the ball. He caught a ball belonging to someone else and they are letting him keep their property. If I toss something of value to you, say a wad of $1000 dollar bills (500 of them) and say "you caught it - you can keep it.", I think the IRS would be all over ME, not you, to pay a gift tax. Why is this different? Why isn't the ball a tax free gift? If the answer is that they only gave away a $5 ball, then we are right back to the question of what the ball was worth when caught - $5 or $500,000. How can the ball club say that when he caught the ball it was only the $5 ball that we are letting him keep, and the IRS says he caught a $500,000 ball?

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-Ernie-

The question arises as to whether a baseball hit out the playing field for a home run and captured by a fan is "lost or abandoned".

A perusal of three dictionaries reveals that an argument could be made that neither term applies.

Bill

Does the ball actually have an owner? It's clearly not Bond's ball as a matter of law. The ball wasn't lost or abandoned using the clear meaning of being lost or abandoned. In fact everyone knew where the ball was at every nano-second of flight. Paul Thomas, CPA

-- "A celebrity is a person who works hard all his life to become known, then wears dark glasses to avoid being recognized." Fred Allen

It wasn't a gift, it was a business transaction. A gift is something given out of "disinterested generosity." In this case it was done for business purposes. Stu

There is a statue of General Abner Doubleday at Gettysburg.

And he is crdited with a major patent for the San Francisco Cable Car Railway.

==And we just returned from Ft Sumpter this week.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

[Hmm, maybe we should be back in the "professional gambling" thread.] We were on the thread of the baseball changing value in the very short time between being caught and some official determination of home run status. In principle this sounds reasonable, after all stocks and many other assets change value suddenly due to an external change or previously unknown information becoming known. But I still can't see the lottery ticket example. Are you saying that your lottery ticket is intangible personal property, probably a capital asset? I see it as more of a contract, a written statement of your agreement with the state to each hold opposite ends of a wager. I still don't see how putting up a deposit against possible betting loss is the same as creating an asset. If you and I agree to bet against each other and seal our agreement with a handshake only, does our wager have some tax-related impact for either one of us prior to the outcome of the bet? If I put a dollar in a slot machine and then decide to hit the "cash out" button instead of pulling the lever, did I buy and then sell something for one dollar? I don't think so.

I say that he had $1,000 of earned income in the form of convenience fees charged, not $1,000 of capital gain income. The tickets were "worth" $1 to a gambler, nothing to a non-gambler.

-Mark Bole

[...]

The official Cubs web site (and most other MLB teams I suspect) does explicitly state that fans can keep balls hit into the stands. This probably makes it easier to disclaim any liability for injuries caused by hit balls -- "Dear Fan: sorry about your concussion, by the way we want our ball back". What about balls hit onto Sheffield or Waveland avenues in Chicago, or into San Francisco Bay? It seems much clearer to me that these are truly abandoned, thus leading to the "treasure trove" application.

-Mark Bole

Treasure trove requires that the ownership be unknown.

The ball club is known to be the owner, even placed special identifying marks on the ball. If the ball club allowed the fan to keep the ball, that could be a gift or could be compensation, but is not treasure trove.

-- ArtKamlet at a o l dot c o m Columbus OH K2PZH

Tangible person property, since it has physical being. (There are probably special tax rules about lottery tickets, which I'm not familiar with.)

It isn't. They're not the same thing.

No. But then, there's the issue of tranferrability. If I buy a lottery ticket, I can sell it to you, and the lottery has no say in that transaction. If I have a bet with you, you can't transfer it to your friend without me agreeing to the transfer.

I think there was a purchase (of the intagible "right to receive what one pull of the lever gets") and then a return for refund. A return for refund isn't a sale (consider sales taxes).

I agree it was $1,000 of earned income, just like anybody else who bought $1,000 of anything for the purpose of resale and sold it for $2,000.

But all sorts of gamblers paid $2 for them.

The fact that some people didn't want them at all has nothing to do with their value. Seth

That may be based on the dictionary definition. But there are several things you neglect when you try to draw the line there. First of all, there is no definition of treasure trove in the IRC - it's not referred to at all there. It is referred to once in the Regulations, but just as an example of income that is taxable even though it isn't specifically referred to in the Code. As an example you can't say that other similar kinds of accessions to wealth would not be taxable. I looked at Supreme Court decisions using the phrase, but there was no definition. But two of the cases referred to treasure trove as property that had simply been abandoned. In any case, the simple fact that where property came from is known would not detract from its taxability, because there is no such distinction in the code, or even in the regulations. Stu

Even though it lacks a well-defined legal definition, treasure trove is essentially a form of unearned income, i.e., found wealth that does not appropriately fit into another income category, e.g., earned, investment, tax exempt, excluded, etc. However, since Mr. Murphy has announced he is selling the ball at auction, this point is moot.