Can you be taxed on the supposed value of an object?

22 08 2007

Can you be taxed on the speculative value of an object?  Apparently so.  The fan who caught Barry Bonds’ 756th home run is having to put it up for auction because several people told him he would be taxed on the souvenir just for holding on to it.

Nobody knows the exact value of the historic baseball yet, but many estimate it will be around $500,000.  The lucky fan who caught the ball is Matt Murphy, a 21-year-old college student from New York.  He doesn’t have the money to pay the taxes on it, which could be $150,000, so he has to sell it, even though he wanted to keep it.

Here’s where I have a problem with the process.  What is the actual value of an official Major League baseball?  Let’s say $10.  I understand that this particular ball will be worth more to collectors because Bonds broke the career home run record, which is arguably the biggest record in all of sports.  But still, the ball is worth only what someone will pay for it.  The fan has invested no money in it, so there shouldn’t be capital gains taxes on it.  He’s not gaining income if he doesn’t sell it, so there shouldn’t be income taxes on it.  Yet I’ve read in multiple places that he would have to pay taxes on the supposed value of this ball.  I don’t think that he should be taxed on it.

Consider how this applies to other situations.  Suppose your grandfather gave you a car from his youth which has now become rare.  If someone were willing to pay $50,000 for it, do you have to pay taxes for it based on that value?  You shouldn’t.  Or on a smaller scale, suppose you open a pack of baseball cards and pull out a $10,000 card.  Do you have to pay taxes on that if you don’t sell it?  Can a 13-year-old card collector suddenly owe the government thousands of dollars in taxes over a pack of cards that might’ve cost $5?  Suppose your parents saw the Beatles in concert and had their Sgt. Pepper record autographed?  There’s one selling for $750 on eBay now, so would the owner be liable for taxes on it even if they didn’t sell it?

Stocks aren’t treated this way.  If I buy $5,000 worth of stock and the value goes up to $10,000, I don’t have to pay any taxes until I sell it.  I think sports memorabilia should be treated the same way.  I’ve never heard of this issue before, but perhaps it’s because the value of the baseball is expected to be so high.  But what if the collector were able to hold onto the ball and pay the taxes and then the value went down?  The collector would’ve already paid taxes on it with no added income, and I’m pretty sure he won’t get a refund from the IRS.  It could happen, because Mark McGwire’s 70th home run is no longer worth $3 million like it was initially.

I understand having to pay taxes if such an item is sold, because then you’re creating income.  But a person shouldn’t be taxed based upon the assumed value of an object if it were put to auction.  It’s really unfortunate for the fan to be forced into the position of having to sell it, and it’s not fair to him.

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2 responses

22 08 2007
Kri'

Boy, have you opened a sore topic for most American’s on this one. You have presented a very persuasive argument, but the fact that any reasoning is needed to prove your point makes it painfully clear how overtaxed we really are. We reflectively ask ourselves, “this kind of tax isn’t right, is it? Right? Am I looking at this right?”

OF COURSE NOT! How utterly ludicrous this tax is.

Of course, what would a great American tradition such as breaking the home run record be without another great American tradition (that seems to be growing): over-taxation…

11 10 2007
paul

I can’t believe this. I just shake my head. Why doesn’t the federal government do I Q tests and bill us in advance for our taxes based on our intelligence, so we can get it overwith. A supposed valu right? I do not understand why this is going unnoticed by most everyone. It seems no one is looking at this and saying “WHAT!”. Everyone seems to just accept this and make excused for the federal govenment. We have come a long way. We are becoming more and more submissive. It hope we as a people get what is happening to us before it is too late. We are a country that is still very young. It takes time for a government to completely fool its’s people. How long does it take. Look at other countries in Europe, Asia and the Middle East. It took time for them to mess it up. They did not see it coming either. Now a lot of countries are trying to make a come back and loosen their governements grip. Hopefully when we get it , it won’t be so far gone. Good luck everyone.

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