Taxable Talk

The Associated Press is reporting that Barry Bonds’ 756th home run ball will be auctioned. Matt Murphy, the man who caught the ball, has consigned the ball to Sotheby’s SCP Auctions. The ball is expected to be worth over $500,000.

Mr. Murphy, who is 21, told the AP, “I’m upset by the decision I had to make…I wanted to keep it. I’m young. I don’t have the bank account. … It would have cost me a lot more to keep it.”

Mr. Murphy was told by several people that he would owe tax on the $500,000 that the ball is worth even if he kept it. While I personally disagree with that (I think he wouldn’t have owed anything until he sold it), it is very clear that he will owe tax on the ball when he sells it. Given federal, New York, and New York City combined taxes (Mr. Murphy is a resident of Queens, New York), I expect that Mr. Murphy will owe about 40% of the net sales price (the gross sales price less the commission the auction house receives).

As for Barry Bonds, his Giants are now playing out the string (they are in last place in the National League’s Western Division). There’s no new news regarding his possible indictment on tax charges.

An interesting article this morning in the Wall Street Journal: What are the tax implications of catching Barry Bonds’ 756th home run? Sometime in the next few weeks some lucky fan will likely catch the ball. (There’s always the chance, albeit slight, that the ball will ricochet back onto the field, say, off a foul pole, and this issue will be moot.)

Tom Herman in today’s Tax Report in the Journal (Note: Pay Link) ponders that question, and gets different answers from different experts. The IRS prefers not to answer the question. Alice Abreu, a professor at Temple University Law School, believes its taxable income the moment its caught. Other unnamed law professors disagree. And Don Korb, Chief Counsel of the IRS (and a baseball fan), told the journal, “Please, whatever you do, don’t ask me that question.”

My view is that a fan, having purchased a ticket, has the right to take with him from the game anything thrown or hit from the field of play (such as a baseball). If he is lucky enough to catch the ball, he’s paid for it by the ticket.

However, if (or should that be “when”) he sells the baseball—and estimates of the worth of Bonds’ 756th home run baseball start at $400,000—that lucky fan will owe tax on the proceeds.

Of course, we’re dealing with the IRS and it wouldn’t shock me for them to interpret this completely differently.