No, because there is an actual value placed on that car.

 

There is an actual value placed on that baseball too.

There is an actual value placed on that baseball too.

There is a hypothetical value placed on the ball. The actual value is about $2.99...

There is a hypothetical value placed on the ball. The actual value is about $2.99...

 

You're getting into semantics. The actual value of that ball is not $2.99, as you know. The actual value of that ball is its fair market value, which most agree is around $500k...there is nothing "hypothetical" about the ball being worth around $500k, and there is nothing "hypothetical" about experts' appraisals. They are not exact, but they are reasonable estimates of an item's worth, which is what the tax is figured on. Simple set of facts here. Tax due.

I don't agree with it, but that's the law...

What? I'll put my mom on speaker phone.

You're getting into semantics. The actual value of that ball is not $2.99, as you know. The actual value of that ball is its fair market value, which most agree is around $500k...there is nothing "hypothetical" about the ball being worth around $500k, and there is nothing "hypothetical" about experts' appraisals. They are not exact, but they are reasonable estimates of an item's worth, which is what the tax is figured on. Simple set of facts here. Tax due.

I don't agree with it, but that's the law...

"What most agree"? Who? How are the qualified to determine the value of something that only has value if it sells? Count me in the other half that HHSDad was talking about...

You're getting into semantics. The actual value of that ball is not $2.99, as you know. The actual value of that ball is its fair market value, which most agree is around $500k...there is nothing "hypothetical" about the ball being worth around $500k, and there is nothing "hypothetical" about experts' appraisals. They are not exact, but they are reasonable estimates of an item's worth, which is what the tax is figured on. Simple set of facts here. Tax due.

I don't agree with it, but that's the law...

The actual value of the ball is unknown. And I'm guessing you have never worked with an appraiser. Ask three different experts what the value of something is and you'll get three different answers. That's why they usually ask what you want the value to be before they start. It determines how they come up with their range of values.

 

If I give the ball to charity, when do I get to deduct it? Not until the charity sells the ball. Only then can I fix a price for a charitable deduction. Same should apply for receiving an item of unknown value.

"What most agree"? Who? How are the qualified to determine the value of something that only has value if it sells? Count me in the other half that HHSDad was talking about...

 

What??? Sports memorabilia are appraised every day...and you don't have to sell it for it to have value, lol...

 

Here is the right answer. It came from a Wall Street Journal blog...again, real simple...and then I'm off of this thread...

 

 

 

1. The fan has an income (windfall under section 61) at the moment she catches the ball and takes the ownership of it, and not when she sells it.

 

2. The amount of income mentioned in Item 1 above is the fair market value of the ball at the time. (The fan may need to get an appraisal. For the tax treatment of the appraisal costs, see Item 5 below.)

 

3. The income from catching the ball is ordinary income. It is not a self-employment income, however, because the ball as a windfall does not constitute renumeration in exchange for personal services.

 

4. The profit upon sale of the ball is indeed a capital gain, and taxable at a lower rate if the fan satisfies the holding period. The ball should probably be treated as a collectible, however. Any long-term gain therefor should be taxable at 28 percent and not at 15 percent (or 20 percent if the sale occurs after 2008).

 

5. Once the fan includes the income mentioned in Items 1 and 2 above, her basis is the amount that she included in her gross income in the year of catching the ball. In addition, she may increase her basis further with any appraisal costs paid or incurred and any costs paid to sell the ball (e.g., broker fees or commissions).

Comment by Tax Attorney - July 25, 2007 at 1:23 pm

He should pay taxes (if we have to pay taxes)...If you were to win or inherit a car, etcetera..you have to pay the taxes on it...this ball now has value, it is a luxory item. I am sure he is not complaining about the taxes, in that he could always give the ball to someone else

So, if I catch a ball I should have to pay a tax for keeping it? Catching a ball and winning a car are two different things.

 

Sure it's going to bring him a good amount of change in his pocket, but this is ridiculous. Let him pay the amount after it's sold. No one knows, for sure what this ball is worth until someone actually wants to price it. I've heard $500,000. That's an estimation, though. What if this guy can't sell it for no more than $200,000? Will the IRS give him a refund? Probably not. The IRS is a bunch of greedy..... .

The actual value of the ball is unknown. And I'm guessing you have never worked with an appraiser. Ask three different experts what the value of something is and you'll get three different answers. That's why they usually ask what you want the value to be before they start. It determines how they come up with their range of values.

 

If I give the ball to charity, when do I get to deduct it? Not until the charity sells the ball. Only then can I fix a price for a charitable deduction. Same should apply for receiving an item of unknown value.

 

I disagree will all of this. We will agree to disagree. And you don't have to wait for the charity to sell the ball to get your deduction. Your deduction is backed up by...guess what...an appraisal.

A few of my thoughts...

 

1. This is not different then holding a winning power ball ticket for 50 million. Do you have to pay taxes on that 50 million if you never cash the ticket?

2. It was my understanding that if you won a car on a game show you had to pay sales tax on it not income tax. Is this not correct?

3. McGwires single season ball sold for $3,000,000...Bonds single season ball sold for $500,000...how can you come up with a reasonable value for this ball?

4. In no way, shape, or form could the average Joe afford to keep an item like this if he would indeed have to pay tax on it and that is ashame.

5. If you were to find $500,000 in a bag laying in a ditch would you have to pay income tax on it?

6. What if he sold this to a friend for $100? Would that become the taxable value of the ball?

7. Income tax is legalized theft!

1. It is different.

2. Not correct.

3. Reasonable appraisal. You will use yours, government will use theirs, then you negotiate.

4. 100% true.

5. Yes. However most wouldn't report it. IRS knows this guy has that baseball.

6. The appraisal. Gov't would disallow the transaction as bogus.

7. Something everyone can agree on.

1. It is different.

2. Not correct.

3. Reasonable appraisal. You will use yours, government will use theirs, then you negotiate.

4. 100% true.

5. Yes. However most wouldn't report it. IRS knows this guy has that baseball.

6. The appraisal. Gov't would disallow the transaction as bogus.

7. Something everyone can agree on.

I thought you were done???

I say no...

I thought you were done???

 

You did? What, you tired of learning new stuff?

You did? What, you tired of learning new stuff?

I just thought you were a man of your word...