Friday, July 27, 2007

BARRY BONDS, BASEBALL AND THE IRS

Friday, July 27, 2007

Yesterday's Wall Street Journal offered a unique take on slugger Barry Bonds' chase for Hank Aaron's home run record. What will be the tax consequences for the lucky fan who catches the record-breaking ball? The article quoted sports-memorabilia experts estimating it will be worth half a million dollars or more.

Being an accountant I can't help but associate this with taxes.

When will the fan recognize the income? Now, when they accede to wealth? Or down the road, when they sell it?

If tax is due now, before the fan sells, how will they determine the ball's value?

If the proceeds qualify as capital gain (taxes at the special 28% rate for collectibles) what will the fan's basis be? Zero? The price of the ticket to the game? The price of their season-ticket package?

What if the catcher isn't a fan? What if it's a stadium employee or fellow player?

Back in 1998, just before Mark McGwire beat Babe Ruth's single-season 60-homer record, a reporter asked an IRS spokesman what would happen if the fan who caught the ball handed it back to McGwire. The spokesman replied that the fan might actually owe -- and sparked howls of protest. Then-Commissioner Charles Rossoti quickly changed course, confessing that the Tax Code could be as hard to understand as the infield fly rule.

There is a tax lessen here. Most taxpayers generally don't think about taxes until they're due. For most Americans, that means prior to April 15th. Now is the time to start planning.

By the way, if you should be the one to catch the record breaking ball, give us a call and we will help you keep from having a "tax strike out."

Larry Kopsa CPA