Question

What tax would result if Tim Forneris had kept Mark McGwire's record homerun ball vs. returning the ball?

What tax would result if he had later tried to sell the ball to a third party?

Answer 1

A1. When Tim Forneris caught the homerun ball then he cannot be taxed if he keeps the ball or if he returns the ball. Here we will have to look at tax rule which indicates the person catching the home run ball will have no gift tax liability because he will be given a gift tax exclusion under annual gift tax exclusion and lifetime gift tax exclusion. Both of these tax exclusion will exceed the value of the home run ball. However if lifetime exclusion was not be included then also there was no gift tax liability because Tim returned the gift immediately incurring no gift tax. Also it was not possible to tax the ball because its exact value cannot be determined until it is sold. Any estimation made for the value of the ball is just a speculation.

A2. Now if Tim decides to sell the ball then he will be treated like doing sales transaction where one will taxed for profit accruing from sale. There will be profit if one sells the item for price exceeding the cost of the item. The value is clear and tax can be calculated for collecting the same.