Question

HR Slugger is a professional baseball player in a Major League Baseball league. He is a well-known player and is very popular throughout the league, but especially with the local fans. Much of his population is based on his hitting ability, specifically regarding home runs. The issue emerges from the following facts, similar to an actual situation you may have heard of.

• After days of intense anticipation by sports fans and winters throughout the league, Slugger hits a home run that brakes the record for total home runs during a regular season. The record broken had been in place for 45 years. This is a major event in MLB.

• The homerun ball was hit out of the ball park. It was actually caught outside the playing field by a 14-year-old girl who is, along with her parents, a big fan of HR Slugger and the team.

• League policy is that in such a situation, the ball belongs to the person that obtains the ball.

• Given the circumstances (a long-term home run record broken), the subject ball is immediately very valuable. Estimated value could be $5000,000-$1,000,000, possibly more.

• The girl and her parents are very proud of the catch and plan to add the ball their sports memorabilia to be treasured for years to come. As it happens, the parents are clients of yours, and they come to you for advice.

Issue: Does the event described result in any kind of tax issue?

What is your advice to them?

Include factual/legal analysis, including authority for a conclusion.

Answer 1

Issue: Since, the ball has been kept by girl and her parents as a sports memorabilia or otherwise called collectibles, therefore there will be no tax issue in the current year. However, if on a later stage, the ball is sold by girl or their parents, then the income arising from such sale will be taxed flat @ 28% as capital gains, regardless of the individuals' other income or AGI.

Factual Analysis: The fact case of Christian Lopez 23-year-old who caught Derek Jeter’s home run, which was the Yankees star’s 3,000th career hit, can will be taken as example.

The stand taken by Lopez in this case was that the baseball was given to him out of "disinterested generosity", which makes it neither a taxable income in the hands of Lopez nor a gift tax amount in the hands of Yankee's, since it is a exception to the definition of taxable income. This is a quite unsettled major issue going on for a long from IRS.

The final authority to decide in this case will U.S. Supreme Court.