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.