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Staveros | Should the Bond's home run ball be taxed by the IRS or not? |
What tax laws might apply? When the ball was pitched, it was only worth about $5. When it was caught as a home run ball, it was then 'estimated' at $600,000. I believe the ball should not be taxed until it is sold for a profit.
Additional Details
The IRS is reluctant to explain what tax laws would apply. |
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waggy_33
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I agree that it would not be taxed until sold.
An interesting take would be that the ball was worth $5 when it was pitched. Bonds knew that if he hit a home run the value would go up significantly. Therefore when the home run was caught by the fan Bonds made a gift to him that is estimated to be worth $600,000 when it was caught. Did Bonds therefore make a taxable gift to the fan and does Bonds owe a gift tax on the value he gifted. |
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bostonianinmo
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The IRS has NOT stated that they would tax the ball now. In fact, they have refused to publicly comment on the issue at all.
Until a value can be placed on it, there's no way to correctly assess any tax. And with each homer he hits it's value will drop a bit. And if Mr Bonds is stripped of his title over the "juicing" allegations the value could easily drop to nearly zero.
One wag has opined that the fan may be facing tax immediately. I do not share that person's opinion and neither do a lot of tax experts. That guy's opinion does NOT mean that tax is due. |
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Judy1
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And when it's sold for profit is when it WILL be taxed. |
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mommanuke
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It shouldn't be taxed just for catching it. It had negligible value at that time. It should be taxed when sold as any other property would be. |
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George P
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I agree, it would be like the IRS saying that your car is worth a million dollars before you sell it, even though its really worth $10,000, and then tax you on what they estimate the value to be.
I think they should keep an eye on it, if the guy does sell it. If the IRS does make him pay the tax on it, he may have to sell it just to pay the tax on it, but then, who would buy it, since they would probably be taxed on what the IRS could think they would sell it for.
There has to be a law about this somewhere saying you can't be taxed on an estimate. |
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walt631
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It cannot be taxed until final value is determined and paid. That is the final answer |
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Mathew
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No one other than some kook attorney has said anything about the IRS having any public position on this issue. This is such a rare circumstance that anyone including the IRS would just be guessing what the tax consequences might be of having caught this ball. Let us imagine that Mr Murphy caught the ball and took it home never having any intention of selling it or making any money off the fact that he possess such a prize. What would be it's value. I would take the position that he has a basis of the price of his ticket to the game and no gain. Some IRS examiner might have another opinion and the courts would resolve this issue years from now.
At this point I would advise Mr. Murphy to be very careful how he proceeds with the found property which he seems to have recovered.
If I am correct that there is no taxable event until he sells the ball let's look at another possibility. He "gifts" the ball to his dieing cousin (a non taxable event) who leaves it to me in his will (a non taxable event when I inherit the ball but the basis is now the MFV). Being the gracious person that I am I gift it to Mr. Murphy (a non taxable event to Mr. Murphy). I report the gift (estimated value $3Mil) on a form 709 and die insolvent.
What do you think? Would this plan work? |
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chefantwon
 |
The IRS being a government agency will likely find a way to tax the ball more than once. I figure they are trying to figure out an amount that the ball is worth right now and then tax the fan for that value. Then once he sells it, they would tax that amount. Then the IRS would combine both as income and tax that amount. Here's an example of what I'm saying:
IRS estimate of the balls current value: $500,000
Tax on $500,000 = $165,000
Fan sells ball for $750,000
Tax on $750,000 = $247,500
$500,000 (ball value pre sell) + $750,000 (sell price) = $1,250,000 (total income)
Tax on $1,250,000 = $412,500
Total tax paid by fan : $165,000 + $247,500 + $412,500 = $825,000 (Fan still owes $75,000 in taxes)
Of course, the IRS WILL get its money no matter what you do.
"Resistance is futile, we are the IRS." |
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PepsiLime
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I agree not taxing it until/unless the guy sells it, but I had heard that there was the possibility that the irs could tax it at current value without the guy who caught it actually selling it. That's dead wrong in my opinion, the irs would be taxing the guy based on an "estimate" as to what it's worth. It's worth nothing if he doesn't sell it.
I attached a yahoo article about how the irs could tax the guy. |
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sortaclarksville
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Good question. I'm sure you'll get a wide variety of opinions. I'll have to think on this one before formally responding. Good question to think about, though. |
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DH
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The thought that you can catch a ball at game and have to shovel over so much of your find to the IRS is sickening. He did not enter a contest or earn the ball through any business means. It is a "gift", no tax should be paid in the initial year even if the ball is sold. Thereafter tax should be paid on the price appreciation only. |
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CPA/PFS
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Should it be ... Yes.
What is the difference between "winning" the homerun ball and winning a door prize.
If you attend an event, enter a contest, and they draw your name and you win ... say a new vehicle. You are liable for income tax on the value of the vehicle.
If you enter a lottery or raffle by buying a ticket ... and win whatever the prize it ... you are liable for the income tax on the value of the item won.
The individual in question bought a ticket to watch the game AND included in that ticket was the right to keep any baseball hit into the stands.
As to the argument that when the ball was pitched it was only worth $5. That is true. But once the ball passed the fence as a homerun ... it was worth significantly more. The individual acquired the ball AFTER it was a home run ... and AFTER it was worth the significant value.
I think the IRS would have a strong basis on which to levy/litigate this issue. |
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david419_1999
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I agree. But, we don´t make the tax laws. |
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