Taxation of Home Run Baseballs

Kelly A. Moore (Assistant Professor of Law, University of Toledo College of Law) and Adam J. Poe (J.D. 2010 St. Louis University School of Law) recently published their article entitled Home Run Baseballs and Taxation, an Open Stance: How a H.R. can be I.R.D., 3 Est. Plan. & Community Prop. L.J. 79 (2010). An excerpt from the introduction is below:

This article addresses the federal income tax implications of a fan catching a home run baseball and proposes that a fan acquiring such a baseball be initially granted nonrecognition for gross income tax purposes. A grant of nonrecognition will address the concern that it is improper to tax a fan on the fair market value of the baseball at the time of the acquisition, when the taxpayer may not have cash with which to pay the tax liability. The proposal further suggests a framework whereby the tax basis in the baseball remains at zero until the baseball becomes the subject of a sales transaction. This is accomplished, in part, by incorporating income in respect of decedent concepts. The proposal is designed to preserve a zero basis in the baseball until there is a sales transaction to the conclusion that gross income must include receipts such as a home run baseball. The fan is afforded, however, discretion over the timing of the sales transaction and attendant inclusion.

First, this article briefly discusses the relevant income tax law. Next, this article outlines the income tax debate surrounding Mark McGwire’s 1998 pursuit of the single-season home run record. Third, this article proposes a framework allowing a fan to retain a home run baseball while preserving a zero basis in the baseball until it is the subject of a sales transaction. This article discusses select transfer tax considerations, but there is not a related proposed modification given the anticipated reinstatement of the estate tax with the applicable exclusion amount at the 2009 level, and the existing annual exclusion and unified credit provisions of the gift tax.