Taxing Bonds 756th HR Ball?

Matt Murphy is being “forced” to auction off the historic home run ball he caught because he’ll be taxed on its worth even if he doesn’t sell it. Story.
What’s the Straight Dope on this F’d-up situation?

Has anyone official from the IRS its self spoken on the matter, or is it just “tax experts” spouting off?
One could argue that the ball has no value unless it’s sold. Taxes would obviously have to be paid if sold, but why before that?
Prizes that are won are taxed presuming one would normally have to pay for them, but there was no way to obtain the ball before-hand by purchasing it.

What’s going on here?
…and no spouting off about how bureaucratic the IRS is or how the gub’mint can do whatever it wants. I wants cites.

Yeah, that’s pretty screwed up.

So if you had a friend who was a famous painter and sold his works of art for hundreds of thousands of dollars, and he decided he was going to paint one for you and give it to you as a gift, you would have to pay taxes on the thing?

Looks like there’s no consensus on the tax issue:

Hampshire, in reponse to your question, no you wouldn’t. But he might, depending on the value of the painting.

Gift Tax information from the IRS
(I am not a tax accountant or lawyer, but I took 2 tax courses in college. Which means I know enough to know I don’t know shit about taxes. :stuck_out_tongue: )

Everything I can find says that the IRS refuses to comment on the matter and tax llawyers disagree pretty virulently on the subject.
But I’d like to add a question to yours, if I may: Would the amount owed by the fan (if he kept the ball) change if he increase or decreased its value by getting Bonds to sign it or defaced it (I like the idea of having Pete Rose sign it)?

From that article:
The IRS refuses to comment on the matter. Herman asked IRS chief counsel and baseball fanatic Don Korb, who responded, “Please, whatever you do, don’t ask me that question.”
Shouldn’t the IRS have to answer this question? By witholding the true answer, they’re kinda screwing the guy.

It sounds like he’s going on the words of people he’s talked to only.

The article doesn’t cite any tax law experts or anyone from the IRS. Methinks someone convinced the kid with that “taxes” line because the ball will never be worth as much as it is right now.

I don’t find the request unreasonable, to pay the taxes that is.

He knows the value, he knew what the value of the ball would be before he even caught it. He could essentially use it as collateral for a rather large loan. It has value.
I tried to argue this with a cow-orker of mine and he kept bringing up, “Would I have to pay taxes on Marvel Comics #1 if I just found it in a shoebox in my basement yesterday?” I said, “Yes, if you know what the value of the thing is.” If you’re unwillfully ignorant then you can’t really be expected to know the value.
Even if he paid a quarter for the Comic Book from some schluck that didn’t know what it was he’s now on the hook for taxes based on the value of the item.

This guy knows what the ball’s worth, it’s the same as when you win the showcase showdown on the Price is Right. People usually end up taking out loans to pay the taxes or selling some of the gifts for the same reason.

If I was walking down the street and found a 10 carat diamond ring, would I have to pay taxes on it?

If he were to argue the point, is it the burden of the IRS to show that he knew the value of the ball at the moment that he came into possession of it? Or his burden to show that he didn’t? It seems that sort of thing would be hard to prove.

Or does it not matter if he knew at the time he caught it, but rather if he knows it now? Does that mean if yesterday he didn’t know, and today someone told him “hey, that’s worth a lot of money” then all of the sudden he’d owe taxes on it?

It should be taxed at the time of the auction, or sale, when a value can, or has, been definitively put on the ball. (Tax on income only.)

If the guy just catches and places the ball on his mantlepiece for 30 years, without selling it, there is no change in his income. He is still as rich as he would have been had he not caught the ball.

Or, for another angle, what if pays the tax somehow and holds on to the ball. A couple of years from now, Bonds is proven a cheater and the record is disallowed. The ball is now worth nothing, or at least considerably less (yes, I know, it might increase in such a scenario due to the uniqueness of it. Pretend it doesn’t). What then? Does he get his tax payment back with interest?

I can’t see how he should have to pay taxes until he receives the proceeds from selling it.

Also, I think the IRS’s “Don’t look at us” answer is cowardly, but telling. I think they realize that under the letter of the law he owes, but realize that in this extremely rare situation, the law is stupid.

One could not argue under oath that they knew the ball would not have substantial value.

Exactly. It really makes no fucking sense to me to tax the ball. I don’t get taxed on capital gains until I cash out a position. Why should I get taxed for having a historical artifact before cashing it out? And how much would you tax the ball at? It has no real value until it goes to auction. In my opinion, it’s worth nothing until somebody actually buys it.

How bout the Price is Right analogy. You could hold onto the RV for 10 years beat the crap out of it and then sell it for $2,500. It listed for $75,000. What should you pay taxes on?

So, if you’re given $1,000,000 (or a 4 carat diamond worth the same) you should only get taxed if/when you spend it?

This guy was basically given $1,000,000, or whatever the ball’s worth. It’s analogous to wining a large prize on a gameshow.

Yes, he will have to pay taxes on it.
It is an asset that has come into his possession, which has a considerable value. He is now ‘richer’ by that amount. Whether he converts that asset into cash by selling it, or retains it as is, his net worth has gone up by the value of that asset.

Suppose it was a new car rather than a baseball. Say the team had given away a new car to some randomly selected fan, and he happened to be the winner. He would have to pay taxes on the value of the car that tax year – not waiting until he sold the car.

This happens all the time on TV game shows, raffles, etc. The winners get the prizes, but are themself responsible for paying the taxes on those winnings. (And can get in trouble if they don’t – just ask Richard Hatch of ‘Survivor’ --he’s now serving 4 years in prison for failing to pay taxes on his winnings.)

I’m not talking about Mr. Murphy, I’m talking about any random schmo that ends up with a rock that may or may not be a diamond, a ball that may or may not be worth 1/2 a mill, or a comic book that may or may not be a 1st edition… if they ARE able to take an oath and claim that they didn’t know it’s value, then are they off the hook forever? Or only until they DO find out that it’s valuable? What’s the IRS’ recourse - have Mr. Schmo’s mom testify that of course her son knew it was valuable, because he’s such a smart boy?

It just hit me, this whole argument is moot. The ball is currently worth $12.99:

Actually, it would be worth less, because it’s used. And value that is ascribed to the ball after the fact can only be accurately ascribed after the ball is sold.

I can understand having to pay taxes on a prize won, but how would the IRS be able to put a price on the ball? It seems that the list price of a baseball is less than $5, the remainder of the value is dependant on finding someone who is willing to pay more. I would think it would be hard to know the value until it was sold. At that point I would think it’s increase in value would be taxed as capital gains.