Well, it happened.
So on Aug. 7, Bonds broke Hank Aaron's all-time home run record.
Now we watch the subsequent tax game play out as the IRS and tax attorneys try to determine the tax treatment of the record-breaking ball that sailed into the right-centerfield seats last Tuesday night at San Francisco's AT&T Park.
Even before Matt Murphy crawled out from under the scrum with the historic orb in hand, the Wall Street Journal Law Blog had defined the tax debate that would soon follow:
- The fan who catches #756 doesn't owe tax until he or she sells it.
- The value of the ball is taxable income, referred to as "accession to wealth," the instant it is caught.
As tax lawyer Phillip Mann of Miller & Chevalier told WSJ tax writer Tom Herman, "Everyone’s sure they know the right answer, but there’s very little agreement."
I was talking with another tax expert, Fred Stein, RIA Senior Analyst from Thomson Tax
Most estimates have put the ball's value at half a million bucks. That means Murphy would then be in the highest tax bracket,
Stein noted that this same issue came up on Mark McGwire's shot that broke Roger Maris' single season home run record. Back then, the IRS made noise about collecting from that fan just after the catch, but relented because of the bad PR such a plan produced.
Will public perception come into play again? Or, faced with pressure to close the Tax Gap, will the IRS demand its due?
Only the IRS knows: Or does it? The agency's chief counsel Don Korb, when asked by the WSJ to clarify the tax questions surrounding Bond's blast, replied, "Please, whatever you do, don't ask me that question."
Is Korb, who recently came up with a list of the MLB's top 10 tax events (McGwire's 62nd home run ball ranked first), simply being coy? Or is there still a debate going on at the IRS itself?
Time for real Congressional leadership: Count me among the taxpayers and baseball fans who think common sense should prevail; i.e., taxes should be collected only after the ball is sold.
Congress, which loves to stick its collective noses into sports matters, notably steroids abuse and MLB's antitrust exemption, needs to focus instead on the tax implications of record-breaking memorabilia obtained by sports fans.
In addition to the accession to wealth issue (which involves regular income tax rates), there's the matter of capital gains on future
Surely Capitol Hill, which is full of ostensible baseball fans who now have their own Washington Nationals to root, root, root for, can come up with a new law to deal with the special tax consideration such souvenirs deserve.
And it would be great to have it on the books, signed by the chief executive who himself was once a Rangers' co-owner, before the first pitch of this year's World Series.