IRS: No Tax On Home Run Ball

Recognizing a bad call, the Internal Revenue Service said Tuesday any baseball fan returning a record-setting home run ball hit by Mark McGwire or Sammy Sosa won't feel a tax pinch.

"Sometimes pieces of the tax code can be as hard to understand as the infield fly rule," said IRS Commissioner Charles Rossotti. "All I know is that the fan who gives back the home run ball deserves a round of applause, not a big tax bill."

Earlier IRS statements indicating that the valuable baseballs might be subject to taxes even if returned to the sluggers drew jeers from the Capitol and the White House.

"I thought it was a joke," said Rep. Bill Archer, R-Texas, chairman of the tax-writing House Ways and Means Committee. White House spokesman Mike McCurry called it "about the dumbest thing I've ever heard in my life."

The IRS checked its next swing. Fans wouldn't be subject to income taxes or gift taxes if the ball is returned, it said, comparing the situation to one in which a person declines a prize or gives back unsolicited merchandise.

McGwire, the St. Louis Cardinals' first baseman, was tied with Roger Maris at 61 for the all-time single-season home run mark going into Tuesday night's game against the Chicago Cubs. Cub right fielder Sammy Sosa, with 58 homers, also has a chance to break the record.

The image of a supposedly friendlier IRS swooping down on fans who return these historic baseballs instead of greedily auctioning them off brought howls from members of Congress. Some promised to introduce legislation ensuring there would be no taxes due.

"It seems un-American to me," said Sen. William Roth, R-Del., chairman of the Senate Finance Committee. "Instead of being commercial about it, the fan is being generous and still being penalized for it. It makes no sense."

Added House Minority Leader Dick Gephardt, D-Mo., a huge Cardinals fan who represents part of St. Louis: "Only the IRS could turn a once-in-a-lifetime event into a once-in-a-lifetime Catch 22."

Typically convoluted tax code laws regarding estate taxes are to blame for the confusion.

"Our tax laws are replete with provisions that defy common sense and are patently unfair," Roth said.

Major League Baseball owns the balls until one reaches the stands, where it becomes property of whoever manages to catch it. Most balls aren't worth much, but home run No. 62 by McGwire or Sosa could command $1 million or more.

If a fan sells the ball, income taxes of some 40 percent would apply to the proceeds, and that wouldn't change under the new IRS interpretation. If the ball were kept, it would become part of the fan's estate after death and still taxed then.

The problem had to do with what would happen to fans who simply give the balls away.

Gifts worth more than $10,000 are subject to a 40 percent tax. The first $625,000 is exempt under a lifetime gift ax credit, but until Tuesday's recantation the fan would then lose that credit toward a future estate settlement, and still would have to pay taxes on the rest of the ball's value.

"This is another reason why we should abolish the current tax system," Archer said.

Written by Curt Anderson, AP Tax Writer
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