Paul L. Caron
Dean



Thursday, August 9, 2007

More on Tax Consequences to Fan Catching Barry Bonds' 756th Home Run

Last month, I blogged the tax consequences to the fan catching Barry Bonds' 756th home run.  Bonds' record-setting home run on Tuesday night has unleashed additional commentary on the tax consequences to Matt Murphy, the fan who caught the ball.  From the Associated Press: Man Could Face Big Tax Bill on Bonds' Home Run Ball, by Marcus Wohlsen:

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 IRS, 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,"

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%, 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. On the other hand, he said, if the ongoing federal investigation into steroid abuse among professional athletes takes a criminal turn for Bonds, the ball's value could go down -- which would likely allow Murphy to claim a loss.

Not everyone concurs on Barrie's interpretation of the intersection between professional sports and the nation's tax code.

A detailed analysis is available in Joseph B. Darby III (Greenberg Traurig), Barry Bonds' Home Run #756: There Could be a (Tax) Catch, Practical US/Domestic Tax Strategies:

Whether “Catch 756” is or should be taxable has been discussed in a variety of publications, including The Wall Street Journal, and suffice it to say that most baseball fans (and taxpayers) are appalled at the thought that a home-run ball falling into your lap as a souvenir could be followed in short order by a tax bill from the IRS. However, taxation of Catch 756 is not far-fetched. In fact, if the tax law is applied with the same careful scrutiny that umpires give to a typical major league game, it is not even a close call: A ball worth $500,000 is an “ascension to wealth” and is taxable income.

  For more, see:

(Hat Tip:  Ann Murphy, Jay Stanley.)

https://taxprof.typepad.com/taxprof_blog/2007/08/more-on-tax-con.html

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Well, it happened.I had hoped that if I -- and millions of other baseball fans -- wished hard enough, Barry Bonds would not hit #756. But once again, my telekinetic or psychic or whatever mental abilities it would take to control physical events failed... [Read More]

Tracked on Aug 11, 2007 7:15:02 PM

Comments

I never thought of getting richer as an "ascension." Quite the opposite, in many cases.

Didn't the IRS put this issue to rest back in the days of the original steroid titan, Mark McGwire?

Posted by: Jack Bogdanski | Aug 9, 2007 1:41:19 PM

Suppose I were a Cub fan and immediately after the catch I elected to throw is back to the outfield. Tax consequences please.

Posted by: H R Doughty | Aug 9, 2007 1:41:28 PM

Doesn't this differ from the found wad of cash, with an obvious value, and even the diamond necklace, with an appraisal value? The ball can be "appraised," but rather than an estimate of what a pawn shop (or an existing, reliable market for diamond jewelry) would pay, it's really just a guess at what would happen at auction, which is unbelievably speculative. Witness the economists (http://slate.com/id/2166662/) who study whether auctions are even rational.

Also, I think the math is wrong. The post says this: "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%, or about $210,000 on a $600,000 ball."

Yes, $210,000 is 35% of $600,000, but he's a college student, and probably doesn't have much existing income. Or maybe any. So unless we've recently departed from marginal tax rates with regards to baseballs, the 35% rate should only apply to a portion of the $600,000, or $189,074.25. [600,000 - 349,700 = 250,300; 250,300 x 0.35 = 87,605; 87,605 + 101,469.25 = $189,074.25]

Posted by: R. Goldberg | Aug 14, 2007 9:06:03 AM