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Souvenir Tax Bill: Lucky Fan May Owe $210,000

by Flexo on August 9, 2007

in Taxes

If you haven’t been living in a hole and have any interest in sports, you may have heard that Barry Bonds surpassed Hank Aaron’s record and hit his 756th home run the other day. With all the footage from a plethora of angles of Bonds breaking the record, the news also showed a man in a Mets jersey and shirt being whisked out of the stadium by police. The Queens resident, Matt Murphy, was the “lucky” recipient of the home run ball hit by Bonds.

He gets to keep the souvenir, but he may not want it. By the book, the IRS considers such souvenirs as windfall income. They will value the home run ball at over a half a million dollars. Matt could be required to pay taxes of $210,000 according to ESPN even if he doesn’t sell the souvenir. There is also the question about the gift tax. These issues have been discussed at the Wall Street Journal’s Law Blog. Most of the comments are speculative, but someone quoted an old news release from the IRS:

In general, the fan in these circumstances would not have taxable income. This conclusion is based on an analogy to principles of tax law that apply when someone immediately declines a prize or returns unsolicited merchandise. There would likewise be no gift tax in these circumstances. The tax results may be different if the fan decided to sell the ball.

Commenting on this situation, IRS Commissioner Charles O. Rossotti said, “Sometimes pieces of the tax code can be as hard to understand as the infield fly rule. All I know is that the fan who gives back the home run ball deserves a round of applause, not a big tax bill.”

If this is the case, Matt Murphy has no taxes to worry about if he immediately gives back the ball to Bonds, but if he sells the ball he will be required to pay the IRS. But the information from the IRS doesn’t describe the event in while the souvenir is neither given back nor sold.

Queens Man in in San Francisco for One Day Catches Famous Ball [ESPN]

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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • That's a good point. I wonder if he donated the ball to the Hall of Fame or something like that, if he would get to write that off on his taxes?
  • dakboy
    Give the ball back to Bonds? Bonds wasn't the owner of the ball, it originally belonged to either MLB or the San Francisco Giants
  • Sell ball, pay IRS, pocket what's left. What if it won't sell for $500k? What if the IRS' "appraisal" is garbage and the thing only sells for $50? Will he still pay $210k in taxes? Does anyone else think taxing a flyball is the dumbest thing they've ever heard?
  • dakboy, in fairness to Bonds, at least he's one to say that he doesn't believe the ball belongs to him--he knows that it belongs to the fan, and has said that he doesn't want it back. I imagine Cooperstown wouldn't mind getting it, though.
  • Tom
    I still fail to see how this is any different than unrealized gains in the stock market.

    That ball is worth exactly what MLB paid for it - about $4. Until it is sold for more, it will continue to be worth $4!

    If someone thinks your 10 shares of Apple stock are worth $500k, that doesn't change the price of the stock you own one bit. If you accept the offer, you just set a value on the stock and owe taxes based on that value.
  • I'm with Tom. I don't see how he could be taxed on unrealized gains.

    I don't find the infield fly rule that hard to understand.
  • Tim
    it has not value aside from what it cost new of course with depreciation since it is a used ball until it is sold.
  • Yep, something is only worth what someone else pays for it. It is absurd to think that the IRS could impose a tax on something that is not sold and doesn't generate any income for an individual.

    I guess if a meteorite falls in my back yard I better not tell anyone. If the IRS finds out they would try to tax me on my souvenir from space that could possibly have a monetary value ;)
  • Ack. These sort of things frustrate me. There is so much room for confusion in the tax code. Have you heard of The Fair Tax? What do you think of it? Is it doable? Would it be worthwhile?
  • The guy gets lucky by catching the ball and now the IRS might financially screw him over, I can't believe how backwards that type of thinking is.
  • Chris (Baltimore)
    An argument that I believe would hold up in court is "When did the ball become worth a half a million dollars?"

    You could argue that he got the ball while Bonds was circling the bases, therefore it was not officially a home run until he crosses home plate, or maybe not even until the Nationals decided not to appeal whether or not he missed a bag and pitched to the next guy. In that case it was about ten minutes later because the game stopped.

    My fellow Met fans will remember this, back in 2000 in the playoffs, Robin Ventura hit a walk-off Grand Slam in a tie game, but the team mobbed him between 1st and 2nd, he never crossed home plate, and it was officially scored a single. If that happened with Bonds the ball would be worthless.

    I am an accountant, haven't done taxes in a long time, but I'm pretty sure this would hold up.
  • The real question is: Is the ball worth the investment. 1st is it worth 500,000 now, could he sell it for more or less in the future?

    He could sell shares of the ball to offset the tax burden as an investment.
  • Adam
    Of course the IRS cannot tax him on an unrealized game. You misinterpreted the ESPN article, which said:
    ---
    By most estimates, the ball that put Bonds atop the list of all-time home run hitters with 756 WOULD SELL (emphasis mine) in the half-million dollar range on the open market or at auction.

    THAT (i.e, the sale) would instantly put Murphy 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.
    ---
    There's no way an IRS tax bill of $210k would hold up in court if he didn't sell the ball.
  • Perhaps, this person should consult an estate attorney and see if the ball can be given to a charitable remainder trust? That way, there will be charity tax deduction and no capital gains tax when the ball is sold in the trust. He can then take income for a set period or life and upon his or her death, the remaining sum in the trust goes to charity.
  • Adam: I think you meant unrealized *gain.* :-) Theoretically, he could be taxed on receipt of the ball, not as a gain on an investment, but as income -- as one would be taxed when receiving a lottery or gambling winning. The value of this income would depend on what someone thought the ball would sell for, regardless of whether it is sold. That number could obviously only be an estimation.
  • Tom
    Adam: I didn't misinterpret the article. This has been an ongoing discussion (sports talk radio, regular talk radio, blogs, etc) for some time now. The discussion revolves around the fact that an average fan could NOT afford to keep the ball because the IRS would tax the fan on the _assumed_ value of the ball. The jury is still out on this, and the IRS has specifically denied comment when asked, so I am curious to see where this all falls out. With congress so eager to get involved in sports drug testing, I'm curious to see how fast they get involved to prevent the IRS from gang raping a fan over something that has gone on for the last 100 years.
  • Ted
    All I know is I had caught the ball I would've sold it asap., paid the tax due, and be done with it.
  • James
    This blows!!! Gotta love the IRS. When are we gonna get rid of these jack booted thugs. Reminds me of the Beatles song, "tax man" If you haven't listened to in a while, this sitution fits it perfectly! Hopefully there is a special place in hell for everyone associated with the IRS. Criminals.

    Beatles Taxman lyrics.

    Let me tell you how it will be;
    There's one for you, nineteen for me.
    'Cause I’m the taxman,
    Yeah, I’m the taxman.

    Should five per cent appear too small,
    Be thankful I don't take it all.
    'Cause I’m the taxman,
    Yeah, I’m the taxman.

    (if you drive a car, car;) - I’ll tax the street;
    (if you try to sit, sit;) - I’ll tax your seat;
    (if you get too cold, cold;) - I’ll tax the heat;
    (if you take a walk, walk;) - I'll tax your feet.

    Taxman!

    'Cause I’m the taxman,
    Yeah, I’m the taxman.

    Don't ask me what I want it for, (ah-ah, mister Wilson)
    If you don't want to pay some more. (ah-ah, mister heath)
    'Cause I’m the taxman,
    Yeah, I’m the taxman.

    Now my advice for those who die, (taxman)
    Declare the pennies on your eyes. (taxman)
    'Cause I’m the taxman,
    Yeah, I’m the taxman.

    And you're working for no one but me.

    Taxman!
  • Gil
    That why usa is so f-up . 1# sell the ball then pay the taxes . Hurt the poor & love the rich IRS at it best !
  • sleeplessnjmom
    I think he should sell it to someone near and dear to him for $1 and let the IRS tax him on that! Then in 5 years or when he's ready, he can sell it for whatever he wants if he wants.
  • Kdar
    I don't know about other parks, but at Comerica they announce that fly balls may come in to the stands and you may keep it. They do not ask for any kind of payment or tax on it as you leave the park. So, if the fan was hit and needed medical attention would the park or Bonds be responsible? Maybe he should have just let the ball hit them and then sued the park or Bonds to get money to pay the taxes on the ball.

    The whole thing is ridiculous, let him keep it. A whole lot of balls will be hurled back on to the field if there is a threat of being taxed. Kids, leave your gloves at home.
  • Jerry
    Perhaps now is the time to write your congress person. Elections right around the corner. Perhaps they will listen. Turn it into a national debate.

    Tom is right. Till the guy realizes a monetary gain, he should pay no taxes.
  • Tim
    it was reported yesterday that he is selling it through Sotheby's. He doesn't have money he says. Go figure. I expect that he will go through the proceeds very quick as well. He'll then be in the news again about how he spent all the money, is further in debt, etc. etc. You can see the impending scenario.
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