As soon as 21-year-old Matt Murphy snagged the valuable piece of sports history Tuesday night, his souvenir became taxable income in the eyes of the Internal Revenue Service, according to experts.
“It’s an expensive catch,” said John Barrie, a tax lawyer with Bryan Cave LLP in New York who grew up watching the Giants play at Candlestick Park. “Once he took possession of the ball and it was his ball, it was income to him based on its value as of yesterday,”
By most estimates, the ball that put Bonds atop the list of all-time home run hitters with 756 would sell in the half-million dollar range on the open market or at auction.
That would instantly put Murphy, a college student from Queens, in the highest tax bracket for individual income, where he would face a tax rate of about 35 percent, or about $210,000 on a $600,000 ball.
Even if he does not sell the ball, Murphy would still owe the taxes based on a reasonable estimate of its value, according to Barrie. Capital gains taxes also could be levied in the future as the ball gains value, he said…
[A]t least one ball was as much a source of embarrassment for the IRS as revenue.
As Mark McGwire chased the mark for most home runs in a season in 1998, IRS officials initially said the ball that broke Roger Maris’ long-standing record could be subject to taxes even if it were returned to McGwire. The statements were ridiculed by politicians and quickly disavowed by the agency’s top brass.
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Here’s a thought:
Quit arguing that people don’t legally have to pay taxes and start arguing that taxes, legal or not, are a violation of property rights.
Hank Aaron’s 715 ball (& bat) are in the Braves museum at Turner Field.
Micah,
ROFL
“Here’s a thought:
Quit arguing that people don’t legally have to pay taxes and start arguing that taxes, legal or not, are a violation of property rights.”
Kevin, why not do both? De-fang the beast and deprive it of any claim to moral or legal superiority.
Throw it in a bag of balls and go do batting practice all year. Make the IRS agent identify it next Spring.
Two words:
FLAT TAX
The real issue here is the sad fact that the ball’s worth will be determined by “market value.†What about personal value, which might be immense but which can’t be determined monetarily. If I don’t want to sell the ball, then I’m not sure how “market value†can be applied, since it’s never going to be on the market. And what if a child had caught it? Would that child then be in the same situation? But finally, perhaps we should consider the category of “historical value,†because frankly, I wouldn’t really place that above zero. When Bonds is banned from baseball ala Pete Rose, and his record officially removed from the records book, and the ball DROPS in value, will the IRS return to issue a refund on the previously collected taxes?
There are two issues here:
(i) the ‘ex ante’ issue – what would constitute fair tax treatment in this situation?
(ii) the ‘ex post’ issue – what is the correct tax treatment given the existing legislation?
In terms of issue (ii), the IRS will argue that this is a windfall and tax should be withheld and paid. The counter-argument is that the ball is personal property and should be subject to capital gains tax IF and WHEN sold. The outcome will depend on how some judge interprets the law, and not whether any of us agree with the law.
In terms of issue (i), I believe that the fairness of any tax law can be measured based on the principle of equity, meaning that persons at the same economic level should bear the same tax cost. So, a person who catches a ball and sells it for $x should be taxed the same as a person who earns $x in the year. However, to demand the payment of tax before the ball is caught is the same as asking a person to prepay their taxes at the beginning of the year. So, the counter-argument mentioned above seems to be the most fair tax treatment.
where are we getting the $600k number? was that one expert’s estimate? this ball would fetch a FAR higher price than that at auction. I’d say at least double.
The US is also a country that takes away about half of a persons net assets (above an arbitrary minimum) when they die. Even Russia doesn’t do this any more. If you want to grow a business, stay away from the US. There is no limit to the governments appetite. A national consumption tax will likely be added as well in the next 10 to 20 years. Massive government bloat will make us look like a sick animal to the other “predators” in the global “forest”.
I wonder if he pays taxes on an estimated value at auction does the auction house have to pre-pay the irs for selling the ball and if it doesn’t meet the irs estimated value how fast is the refund and if it’s worth $500,000.00 at auction and the auction house gets 25% of sales on average then he’s taxable value of the ball is less.
Only in America; What a place!! What’s next? Taxing of entrepeneurial ideas while they are still in your head??
Anthony: “Kevin, why not do both? De-fang the beast and deprive it of any claim to moral or legal superiority.”
It appears to me that the beast grows it’s teeth back as fast as they fall out.
The IRS wouldnt claim anything for such a high profile event.
The universal goal of a parasite is to suck as much blood as it can without damaging or bothering the host.
That’s why every parasite in nature also produces pain killing drugs.
Of course states arent always as smart as a leech or a mosquito so once in while the host gets riled up and revolts.
Anyone who is an American should be ashamed of their citizenship because of this.
vote Ron Paul!
He wants to get rid of the IRS and setup a flat tax!
Would this idea work?:
If I caught the ball, I would just ‘give’ it to a relative of mine who lives in a country that doesn’t tax this sort of thing (not a US Citizen btw) and have him sell the ball and keep the money in his account. I live the good life whenever I visit Europe as well as have him send me lavish gifts. For the sake of argument let’s assume he doesn’t keep any of the money for himself. How will the IRS go about taxing me if they can at all?
George W: they won’t – they’ll charge you with criminal evasion, lock you up forever, and argue with the foreign govt that the money in your relative’s account is really yours and they want 100+% of it. (And if they don’t get it, there might be a “regime change” in that country…)
I have to agree with the article, if your given $600,000 for one catch, there is no doubt you should be taxed! otherwise its just not fair.
interesting thought, but then we could argue about lots of things, for example kicking a ball or cooking an omelete?
This seems not quite accurate somehow. As several people have commented, how can you tax someone on what an item might be worth if they sold it when they have not, in fact, sold the item. As I understand tax law, an actual transaction beyond mere possession must take place before taxation occurs. If I were hired for a job at $50,000 a year and then, before earning any money chose to take no job for the year, would I still face a taxable action merely because I had been hired? I realize that’s an awkward example because it’s income tax law, but it seems relevant in that if you simply possess the ball, it doesn’t mean you will sell the item. I have a few rookie baseball cards of players who are and who probably will be Hall of Fame caliber players – will the IRS come and bill me ahead of time even if I never sell these cards?
Ok, riddle me this. If he were to lose the ball, or if it were destroyed, say, in a fire, or if it were chewed up by a dog, or defaced, or otherwise rendered worthless. Would the owner then be able to claim a loss?
That would be poetic justice. Nobody gets the ball. It rolls off the deck of a ship and sinks to the bottom of the ocean, or accidentally falls into a wood chipper, or is stolen, never to be seen again. Both the IRS and baseball fans lose.
This has got to be the most rediculous thing I have ever heard in my life.
He would still come out ahead, if he sold it. That is what I would do.
Intriguing. Highlights the absurdity that lurks everywhere in the details of taxation laws.
you should be able to beat them at their own game, implicit in these words:
“It’s an expensive catch,” said John Barrie, a tax lawyer with Bryan Cave LLP in New York who grew up watching the Giants play at Candlestick Park. “Once he took possession of the ball and it was his ball, it was income to him based on its value as of yesterday,”
Correct me if Im wrong, but the ball’s value ‘as of yesterday’( before the big game) would have been less than five dollars – it was at that point an unremarkable baseball just like millions of others. It took its use in the game the next day to give it the higher value driven by collectable desirability.
and even if they do decide to base it on the post-game value of the ball, there is no way to determine that value without entering into an arms-length sale agreement. so how would they manage to assess it, short of confiscating it and placing it on auction?
This reminds me of a set of collectible items featuring a world-famous athlete. The items include his pictures, moves, tips and sports items. In exchange this athlete is paying high taxes. It’s quite unfair that the government is exacting unreasonable taxes and yet the people can’t see any output or product from these taxes. What’s unfair is that they’re asking for almost 75% of one’s income; sometimes 100% for the first taxes.
Responding to this post: “You can’t do that to baseball. Who would wantto attend and catch a ball. After this non-sense, what will they do if it is a four year old who chatches the ball!?!?!?!
Well, the dispicables from the IRS would probable take your kids for hostage.
The kid ought to sell the ball to his brother, friend, whoever for $1 and let the new owner do the same, and on and on.
The IRS needs a slap in the face and a kick in the groin from all of us until they are lying in their own excramant and then swept away with the next morning’s rubbish removal.
Their is no law making 98% of Americans liable for any Federal Income Tax.
Just imagining a whole bunch of pitching machines, maybe portable like on the back of pickup trucks, driving by IRS offices and tossing fastballs through the windows. Brigades of volunteer troops displaying this sort of anger would be interesting.
I think that’s an awkward example because it’s income tax law, but it seems relevant in that if you simply possess the ball, it doesn’t mean you will sell the item.
That would be poetic justice. Nobody gets the ball. It rolls off the deck of a ship and sinks to the bottom of the ocean, or accidentally falls into a wood chipper, or is stolen, never to be seen again. Both the IRS and baseball fans lose.
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