What? That’s right, sports fans (and fans of esoteric tax laws). The Associated Press reports that Mr. Matt Murphy, the lucky fan who caught Barry Bonds’ historic record breaking home run ball, will owe taxes on the estimated value of the baseball regardless of whether he sells or keeps the ball. Why? Because it is considered income
The situation: Murphy is a 21 year old college student, so he was likely in a very low tax bracket until he caught the ball. According to the tax official quoted by the Associated Press, catching the ball should put Murphy in the highest tax bracket for individual income, which is currently about 35%. It is estimated he will have to pay about $210,000 on the ball’s estimated $600,000 value.
Sell it or keep it? To top it off, he may not sell the ball! He is quoted as saying, “Part of me might want to sell it, but I really am leaning towards keeping it. It’s just too valuable, sentimental.” I’m not sure where a normal college student can come up with over $200,000 to pay the taxes he may owe in order to keep the ball, but if he can do it, more power to him!
What if the value of the ball changes? The AP also reports that if the ball increases in value (even perceived or estimated value), Murphy will owe capital gains taxes. Ouch! Conversely, if the value of the ball decreases, Murphy can file for losses.
Can the IRS do that? Honestly, I am not sure how they IRS can tax unrealized capital gains if the perceived value of the ball increases, nor do I know how they can accurately gauge the value of the baseball in order to tax it if he does not sell it.
One of a kind items of this nature generally sell at auction and there is no accurate method to guage how high or low the final selling price would be. He did not win a car or some other easily valued item on a game show. This is a one off item with no specific price tag attached.
Other options? Mr. Murphy has other possibilities as well – such as giving the ball to the Baseball Hall of Fame, donating it elsewhere, or giving it to Barry Bonds. If he donates the ball, does that mean he gets a $200,000 tax deduction?
What will happen? Obviously there are a lot of unanswered questions surrounding this situation. Similar questions arose when Mark McGwire broke the single season home run record in 1998. There have also been other historic home run balls with similar questions surrounding them. In almost every case, the person who caught the ball ended up selling it, which rendered all of these questions moot.
My guess is Murphy is enjoying his 15 minutes of fame and dragging this out as long as possible. And why shouldn’t he? The more the ball is talked about and the more press it gets, the more some wealthy collector is going to want to ad it to his personal collection. It sounds like a smart business move on Mr. Murphy’s end. It looks like they don’t teach everything in college!
Another question: The ball has an estimated value of $500,00-600,000. How much is the home run record worth?