You Make the Call - Oct. 24, 2024

Question: Benny has been preparing for the World Series by oiling his catching glove, planning out his game day snacks and, of course, reviewing his tax situation. Due to the great seats he secured for the games, he anticipates catching a home-run baseball. Benny's personal tradition is to return the ball by immediately throwing it back onto the field. He fears that his catch and release of the valuable ball will generate income or gift tax consequences to him. Is that the case?

Answer: No, there will be no income nor gift tax consequences to Benny. The IRS has informed taxpayers that the catch and release of a home-run baseball will not create any taxable income [IRS News Release 98-56, 9/08/1998].

The IRS has likened the situation to a taxpayer's refusal to accept a prize or unsolicited merchandise awarded in all types of contests. Generally, prizes are included in the recipient's gross income for federal income tax purposes unless the contest winner refuses to accept the prize [Rev. Rul. 57-374, 1957-2 C.B. 69].

Benny's return of the ball will also not constitute a taxable gift being made. For there to be a gift, the donor must have sufficient property or ownership interest in the transferred property.

Now armed with the facts, Benny can fearlessly execute his plan to throw back the World Series ball, knowing there are no income or gift tax consequences to him.