The IRS can take the fun out of just about anything. Case in point: Last week, baseball phenom Shohei Ohtani became the first major league player to start the “50-50 club” by hitting 50 home runs and stealing 50 bases in a single season. And when he did that, one lucky fan in Miami caught the 50th home run ball and walked away with it even though he had the opportunity to give it to the Dodgers. No one yet knows whether the lucky fan will keep the ball or sell it. Should he decide to sell it , it could be worth hundreds of thousands, or even more than a million dollars. With these numbers, the ball could come with a huge tax bill.
That is because the IRS is likely to treat the ball as a “collectible,” meaning that it will be taxed at a flat 28% rate. Ouch. While the tax law doesn’t define what makes an item collectible, it lists certain items such as a work of art, a rug or antique, any metal or gem, any stamp or coin, or any alcoholic beverage. But the law also allows the IRS to designate any tangible property as a collectible, so it could do that with Ohtani’s 50-50 home run ball.
But the real question is what the ball’s value is. A conservative value would be in the mid-six figures based on prior historic home run balls. For instance, Mark McGwire’s 70th home run ball was purchased for $3.2 million. Aaron Judge’s 62nd home run ball sold at auction for $1.25 million - and the new owner reportedly turned down a $3 million offer. But Barry Bonds’s 73rd home run ball only sold for only $450,000, ($517,500 with commissions) in 2003.
So, it really is hard to estimate a value. But, since the 50-50 accomplishment gained a lot of attention, baseball pundits believe that this accomplishment may not be repeated. Also, wealthy baseball fans in Japan may also want to purchase the ball, which could up the price. On the other hand, as of September 25, 2024, he has 53 home runs and 55 stolen bases so these subsequent home run balls dilute the value of the 50-50 ball, especially if Ohtani gets his 55th home run.
As of now, a report claiming that the Dodgers offered the fan $300,000 for the home run ball. While this may be a lowball offer, it is the only serious one at the moment and could represent fair market value and this amount could be reported for income tax purposes. No one really know, since the IRS has not issued guidance on how historic home run balls will be taxed.
The IRS is probably staying silent as of now since the confusing guidance on this issue could annoy legislators and a few would love another reason to reduce the Internal Revenue Service’s funding. For instance, when the story of the fan facing tax bills after returning Mark McGwire’s home run ball came to light, former Senate Finance Committee chairman Bill Roth (R‑Del.) complained that “the fact that there was ever even the possibility of Mark McGwire’s 62nd home run being taxed is a prime example of what’s wrong with our tax system.” I would tend to agree.