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Catch a Baseball, Owe the US Govt $210,000 before selling it?!

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Craig
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Ok. Clearly if Matt Murphy sells the Barry Bonds baseball he caught for what it's value has been toted at ($600,000) I "get" that he'd owe 35 percent in taxes (tax bracket for that kind of income) which is estimated at 210,000. But an AP story today is stating "Even if he does not sell the ball, Murphy would still owe the taxes based on a reasonable estimate of its value, according to John Barrie, a tax lawyer with Bryan Cave LLP in New York. Capital gains taxes also could be levied in the future as the ball gains value, he said. "

Are you kidding me?!

http://sports.yahoo.com/mlb/news?slug=ap-bonds-ball&prov=ap&type=lgns
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mominator
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Well that is a real fine How do you do! I say let Bonds pay the taxes!
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Calvin
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Super-wealthy hedge fund jackasses get away with paying squat in taxes, but by all means, let's go after the guy who caught a baseball.
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I heard about this last night. It is outrageous!

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Craig
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I would have thought (and still do) that technically, the ball has ZERO value UNTIL it's sold.

If Matt gave the ball to a friend as a gift now, the friend would owe taxes? PuLEaSe. That's pretty crappy.

What's next. Taxing people for potential income? Tom Hanks - you are so talented and you no doubt will get $20 million for your next gig, so this year we're going to tax you before you make that money...
"A little nonsense now and then is relished by the wisest men" - Willy Wonka
FindingNamo
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You're sounding like a typical tax and spend liberal. Oh, wait. No you're not.
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Jilani
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Is this really surprising to people? Any windfall is considered part of your income. It's no different than winning a car on a game show, for example. You owe taxes on the value of the car whether or not you keep it or sell it. (Remember the Oprah debacle?)

Under the tax code, you generally owe income tax on any form of income, which is defined (through a subsequent court decision) as any accession to wealth realized by a taxpayer over which the taxpayer has complete dominion.
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Calvin
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There's a difference. A car has a definite value.

The only value that could be ascribed to this baseball is the $5-$10 it would cost to buy one at Academy. If somebody at some point wants to pay more because it happened to touch the bat of Barry Bonds, well, then it becomes an income issue.
Updated On: 8/9/07 at 04:36 PM
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Even if he does not sell the ball, Murphy would still owe the taxes based on a reasonable estimate of its value, according to John Barrie, a tax lawyer with Bryan Cave LLP in New York. Capital gains taxes also could be levied in the future as the ball gains value, he said.

*shrugs* kinda makes sense.

I don't know all about the specifics of the tax law/code that covers this, but isn't it like people who win prizes on The Price is Right, or who get upgrades on their homes on Extreme Makeover: Home Edition, or whatnot- even if you don't sell that boat you won in the showcase showdown, you still own it and it has a worth and you have to pay taxes on owning it...so I guess even if you don't sell your ball, it still has a worth and you still have to pay taxes on it?

My question, though- isn't this sort of thing subjective? If one company says your ball is worth $400,000, and one says $600,000 (I have no clue about the Bonds ball specifically, I'm just making up numbers here)- isn't there always a range when it comes to what memorabilia is worth? So who comes up with the value that you have to pay the taxes on?
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Craig
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As Calvin said - the only true value of this ball is $5-10.

A car, refridgerator, etc has a definite value. So does the ball. Whatever it was bought for.

"A little nonsense now and then is relished by the wisest men" - Willy Wonka
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OK, I'll grant you that there is a practical difference in that it is easier to determine the value of a car than the value of this baseball, but the concept is not different in terms of taxability. While there may be a dispute over how much the actual value of the baseball is (which ultimately might need some sort of adjudication), there is no dispute that it constitutes taxable income.

Edit:

So who comes up with the value that you have to pay the taxes on?

Ultimately, it would be a court of law, and presumably the IRS and the taxpayer would each have the opportunity to introduce expert testimony as to the baseball's value.

A car, refridgerator, etc has a definite value. So does the ball. Whatever it was bought for.

Not exactly. Just as with real property, it is possible to "improve" the property after it has been purchased, which causes its value to increase. The ball has similarly been "improved" in a way that arguably increases its value above its original retail price when it was just another ball.
Updated On: 8/9/07 at 04:40 PM
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So, let's say I go to a garage sale in Peoria and find some priceless antique mixed amongst the junk. I pay the unwitting old man running the sale $10 for it.

What happens come tax time?
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Nothing unless you get busted by the Antiques Roadshow.
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Craig
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"The ball has similarly been "improved" in a way that arguably increases its value above its original retail price "


Right.. but WHEN it's sold. If you're a home owner the value of your property goes up by improving "on paper" - but until you sell, it's not worth a dime more than when you bought it.
"A little nonsense now and then is relished by the wisest men" - Willy Wonka
cheezedoodle
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To be fair Craig - we have a war to fund and any and all logic in such matters is null and void untl further notice.
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Calvin
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Like I said before -- go after the hedge fund people first, and then I'm all behind it.
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Right.. but WHEN it's sold. If you're a home owner the value of your property goes up by improving "on paper" - but until you sell, it's not worth a dime more than when you bought it.

You're correct in your example, but I was talking about determining the value of the ball at the time it was acquired by this guy - it became income to him as soon as he caught it; the next question was, how much was the ball worth when he caught it? Your answer was it was worth its purchase price; I was saying that it had already been improved beyond its purchase price prior to his acquiring it. So a better analogy with real property would be: you buy a house for $100,000. You make improvements worth another $100,000, and then you give me the house for free. How much is the house worth for purposes of my taxable income? The answer is $200,000, not $100,000.

Like I said before -- go after the hedge fund people first, and then I'm all behind it.

Calvin, I agree completely - but that's an issue of enforcement. Under the law as written today, this guy owes taxes on that ball. Whether or not the IRS should go after him for it is a separate policy discussion.

Also, I like your antique hypothetical (it feels like law school again!). I would be intrigued to find out the answer, but casual research has so far not helped. My instinct, though, is that the difference between the antique's fair market value and the price you paid the old man constitutes a windfall to you, and is therefore taxable income.
Updated On: 8/9/07 at 05:06 PM
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Calvin
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I studied only media law, but I think the correct answer would be: Calvin pays nothing, because his "windfall" was not caught on national TV. re: Catch a Baseball, Owe the US Govt $210,000 before selling it?!
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MotorTink
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Does the person who caught AROD's big homerun ball earlier this week have to do the same thing? I'm sure that will eventually sell for a decent chunk of change if it sells.

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Jilani
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Calvin pays nothing, because his "windfall" was not caught on national TV.

Excellent point. And I just realized, your hypothetical specifically asks "what happens" as opposed to "legally, what SHOULD happen" . . . :)
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He wouldn't have to pay a dime in taxes if he doesn't sell the ball. Think of it this way. You got tickets to a mets game, you go to shea, you picked up a homerun/foul ball. You don't owe anyone anything but you do walk out of that ballpark with a nice souvenear. This is the same thing for the Bond's ball. He would only have to pay taxes if he sells the damn thing. And, realize this. Realize that the prices that they said the ball is worth is a guess made by a sports memorbialla group. He could sell the ball to the person that is going to pay the most for it. There are going to be a lot of people that want it due to the fact that it is very valubale. It would probally go to the highest bidder.
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