IRS removes tax position on baseballs returned to team
Corey Youmans may have received a six-figure tax bill when he caught Aaron Judge’s record-breaking 62 home run Tuesday night at Globe Life Field in Arlington, Texas.
It all depends on what the Fisher Investments vice president plans to do with the historic ball: give it to Judge and the New York Yankees, keep it for himself, or sell it for potentially millions of dollars. Memory Lane president J.P. Cohen told the New York Post that the ball was worth at least $2 million.
According to media reports on Tuesday evening, the Dallas man has not yet made up his mind. Youmans is married to sports reporter and former Bachelor contestant Bree Amaranthus.
The tax rules for caught balls are as confusing as the infield overflight rule. The IRS, which declined to comment, has never stated its position on whether the ball is taxable when it leaves the stadium or when it is sold by a catcher. The service only said that the balls returned to the team are not taxed to the fan.
Some tax experts say catching a ball is taxable. They point to a 1969 court case Cesarini v. USA. A federal judge ruled that the $4,467 found inside an old piano was a taxable “windfall” much like winning a prize.
H&R Block Chief Tax Officer Katie Pickering disagrees.
“Most of the time, a fan who just holds a home run in a record game or a player’s 600th home run (for example) will generally not pay taxes as long as they hold the ball,” she told FOX Business. .
If you keep the ball until you die, your estate may be taxed, but Pickering says that only comes into play if you’re worth more than $12.06 million.
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Selling a ball for $2 million would likely result in a single taxpayer or married couple falling into the 37% maximum tax bracket.
Actual tax will depend on other factors including your marital status, family size, income and deductions, and how long you held the ball. Owning a ball for more than a year qualifies for a lower capital gains tax rate, but the IRS has a special tax rate for “collectibles”.
Pickering told FOX Business that the ball could be considered a collectible if the game is of historical significance.
“In this case, the ball will be subject to a capital gains tax of 28% if it has been in possession for more than one year. If the owner holds the ball for less than one year, normal income rates apply to the sale,” she said. The usual capital gains rate is 0%, 15% or 20%, depending on income.
Giving the ball to the team
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The issue of baseball taxation arose in 1998, when Mark McGuire, who played first base for the St. Louis Cardinals, set Roger Maris’ 1961 home run record. A sportswriter asked the IRS if Mike Davidson, the fan who caught McGuire’s record 61st homer, was tax liable.
An IRS spokesman said Davidson owed gift tax because he planned to give the ball to McGuire. The statement drew widespread criticism in the White House. Mike McCurry, President Bill Clinton’s press secretary at the time, called it “the dumbest thing I’ve ever heard in my life.”
Pickering says the IRS sighed: “While returning the ball to a club may look like a ‘gift’, thus subjecting the donor (fan) to possible gift tax if the value exceeds $16,000, the IRS says returning the ball is more than that.” looks like a return of an unsolicited item rather than a gift. In this case, the return of the ball will most likely not lead to taxation of the fan.”
The IRS quickly backed downdeciding that the tax was not due.
“Sometimes, parts of the tax code can be as difficult to understand as the infield fly rule,” said then IRS Commissioner Charles Rossotti.
What about benefits?
Teams often reward fans who return historic match balls. Zach Hample caught the 3,000th ball of Alex Rodriguez’s career in 2015 and gave it to the New York Yankees. In return, the team donated $150,000 to Hemple’s favorite charity. He also received two autographed bats, an autographed jersey and tickets.
Pickering says be careful – these items are taxed: “Fan subscribers or other items such as autographed T-shirts or balls will be taxed, as are other prizes.”
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Donation to charity
What if you yourself donate the ball to charity or the Baseball Hall of Fame? Can I claim a deduction?
Yes, but the IRS limits the amount you can deduct each year based on your income. You can roll over any non-deductible donation for five years, but lose it after that, which can make deducting the multi-million dollar ball difficult. Pickering advises that you speak to a tax advisor when you make a large charitable gift.
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She notes that an appraisal will be required if the ball is donated to charity and is worth more than $5,000.
“If the fair market value is unknown or disputed, an appraisal can be a great idea to determine the donated value of a ball,” she said, adding that an appraisal can be helpful in establishing a sale price.
Credit: www.foxbusiness.com /