Barry Bonds’ controversial pursuit of baseball’s career home run record is finally coming to an end as he is only two home runs away from setting the record.
While there is no end in sight to the controversy over Bonds’ suspected steroid use, a new controversy could arise when his 756th home run ball lands in the hands of a fortunate fan.
The lucky fan will undoubtedly be juiced with excitement about his prize, and will be several million dollars richer the second the ball hits his hand. However, since the ball is income to the person catching it, he could owe a substantial amount of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. to the IRS.
From the Wall Street Journal Law Blog:
As Barry Bonds closes in on Hank Aaron’s home-run record, a fun tax-law question looms: If you’re the lucky fan who catches the record-breaking home run ball, what are the tax consequences? Here are the choices:
1. The fan who catches the historic ball shouldn’t owe tax until he or she sells it. This is the common sense view, though common sense sometimes doesn’t comport with the tax code.
2. It’s taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income. to the fan the instant that person catches the ball because it’s “accession to wealth.” This view logically stems from cases saying that someone who finds a “treasure trove” owes tax on it right away.
Also, see TaxProf Blog for more tax law discussion on this topic.
It is uncertain what tax bill the fan who catches the ball will owe, but what is certain is our federal income tax code has reached an absurd level of complexity.
A case like this, however rare, makes clear the urgent need for fundamental tax reform. Too bad the Bush administration refuses to act on the proposals of its own tax reform panel.
The IRS should just hope Bonds hits the ball into McCovey Cove and it floats out to sea so it can avoid a potentially difficult PR situation.Share