Cory Youmans may have snagged a six-figure tax bill when he caught Aaron Judge’s record-breaking 62nd home run Tuesday night at Globe Life Field in Arlington, Texas.
It all depends on what the Fisher Investments vice president plans to do with the historic ball: give it to Judge and the New York Yankees, keep it himself or sell it for potentially millions of dollars. Memory Lane President JP Cohen told the New York Post the ball is worth at least $2 million.
Media reports Tuesday night said the Dallas man has not made up his mind. Youmans is married to sports reporter and former “The Bachelor” contestant Bri Amaranthus.
Keeping the ball
The tax rules for caught balls are as confusing as rules for the infield fly rule. The IRS, which declined comment, has never stated its position on whether a ball becomes taxable when it leaves the stadium or when it’s sold by the fan who caught it. The service has only said that balls returned to the team are not taxable to the fan.
Some tax experts say catching a ball is a taxable event. They point to a 1969 court case, Cesarini v. United States. A federal judge decided $4,467 found inside an old piano was a taxable “windfall” much like winning a prize.
H&R Block chief tax officer Kathy Pickering disagrees.
“In most cases, a fan who simply holds onto a home run ball from a record-setting game or player’s 600th home run (for example) typically won’t owe taxes as long as they hold onto the ball,” she told FOX Business.
If you keep the ball until you die, your estate may owe tax, but Pickering says that only comes into play if your estate is more than $12.06 million.
Selling the ball
Selling a ball for $2 million will likely put a single taxpayer or married couple in the maximum 37% tax bracket.
The actual tax would depend on other factors, including your marital status, family size, income and deductions, and how long you held the ball. Holding the ball for more than a year qualifies for a lower capital gains tax rate, but the IRS has a special tax rate on “collectibles.”
Pickering told FOX Business that a ball could be considered a collectible if the game has historic significance.
“In that case, the capital gains tax of 28% will apply to the ball if it’s held for more than one year. If the holder keeps the ball for less than one year, ordinary income rates apply to the sale,” she said. The normal capital gains rate is 0%, 15% or 20% depending on one’s income.
Giving the ball to the team
The question of taxing baseballs came up in 1998 when Mark McGwire, who played first base for the St. Louis Cardinals, tied Roger Maris’ 1961 home run record. A sportswriter asked the IRS whether Mike Davidson, the fan who caught McGwire’s record-tying 61st homer, was liable for tax.
An IRS spokesperson said Davidson owed gift tax because he planned to give the ball to McGwire. The statement drew widespread criticism from the White House on down. Mike McCurry, President Bill Clinton’s press secretary at the time, called it “about the dumbest thing I’ve ever heard in my life.”
Pickering says the IRS whiffed: “While giving the ball back to the club could look like a ‘gift,’ thus subjecting the giver (the fan) to possible gift tax if the value is over $16,000, the IRS says returning the ball is more like returning unsolicited merchandise than giving a gift. In that case, giving a ball back likely won’t result in any taxable event for the fan.”
The IRS quickly backed down, deciding no tax was due.
“Sometimes pieces of the tax code can be as hard to understand as the infield fly rule,” said then-IRS Commissioner Charles Rossotti.
What about perks?
Teams often reward fans who return historic game balls. Zack Hample caught Alex Rodriguez’s 3,000th career hit ball in 2015 and gave it to the New York Yankees. In exchange, the team donated $150,000 to Hample’s favorite charity. He also received two autographed bats, an autographed jersey and tickets.
Pickering says watch out — those items are taxable: “Season tickets for the fan or other items like signed jerseys or balls would be taxable, just like other prizes.”
Donating to charity
What if you simply donate the ball to a charity yourself, such as the Baseball Hall of Fame? Can you claim a deduction?
Yes, but the IRS limits the amount you can deduct each year based on your income. You can carry forward for five years any non-deductible donation but lose it after that, which may make deducting a multimillion dollar ball difficult. Pickering advises you to speak with a tax adviser when making a large charitable gift.
She notes that an appraisal would be required if the ball is donated to charity and has a value greater than $5,000.
“If the fair market value is unknown or debatable, an appraisal might be a great idea to determine the donative value for the ball,” she said, adding that an appraisal could be helpful in setting a sales price.