Tuesday, July 12, 2011

Derek Jeter May Actually Owe Taxes on Historic Baseball

There was a story out today that Christian Lopez, the guy who caught and returned the ball to Derek Jeter may owe approximately $14,000 in taxes. He apparently received approximately $50,000 in return for the baseball in the way of season tickets at Yankee Stadium, some bats, and other memorabilia. However, in my opinion, Mr. Lopez is getting some bad tax advice, because actually it is Mr. Jeter who may owe the taxes.

Under IRS rules, people are allowed to barter or exchange collectibles. The IRS expects that when two people barter and exchange of collectibles, then the one who has a gain in value has to report that gain on their tax return.

Let us look at this case a little more carefully. In this case, Mr. Lopez caught the ball, therefore he was the rightful owner of it. After the baseball game, Mr. Lopez met Mr. Jeter and gave him the historic baseball. In exchange, Mr. Lopez received several items.

  1. Four Champion Suites tickets for the remainder of the season.
  2. Three autographed baseball bats.
  3. Three autographed baseballs.
  4. Four front row Legends seats for a game at Yankee Stadium.
This was a typical barter transaction that is done in the baseball memorabilia world all the time, albeit with different items being exchanged.

When you really look at this from Mr. Lopez's standpoint, the value of the baseball was probably worth more than the four items received in exchange. If it was worth say $100,000 for example, then Mr. Lopez needs to give Mr. Jeter a 1099 B for the difference in value. According to a New York Times article on this subject, the four items received by Mr. Lopez in exchange from Mr. Jeter was worth approximately $50,000. Therefore, Mr. Lopez could possibly give Mr. Jeter a 1099 B for the $50,000 difference in my example. Also, Mr. Lopez would not owe any taxes. Instead, Mr. Jeter would owe the taxes.

Here is the New York Times article link.

http://www.nytimes.com/2011/07/12/nyregion/fan-may-owe-taxes-for-claiming-jeters-3000th-hit.html

Only if the baseball was valued at less than the items Mr. Lopez received in exchange for the baseball, would he then owe taxes. The Pawn Stars show star, Rick Harrison was quoted as saying that he would have given him roughly $30,000 to $40,000 for the baseball. In this case, if Mr. Lopez sold it outright, then he would owe taxes on whatever he received for the sale. However, a sale never took place. To me, this was clearly a barter exchange of collectibles. Also, I fail to see how Mr. Lopez would owe taxes on this barter exchange, because the baseball would easily be valued at $50,000 or more.

I believe people are jumping the gun a little bit on sticking Mr. Lopez with a tax bill. It is surprising to me that a Derek Jeter fan who is also a tax professional has not offered to step in and help Mr. Lopez file the necessary forms for this barter exchange. Come on people. I cannot be the only one in the country who knows this fact. If you happen to know Mr. Lopez, then maybe you might want to do him a favor and forward him a link to this blog.

I have a Niekro brothers autographed baseball that I might do a barter exchange with Mr. Lopez for one of those Derek Jeter baseballs. I could even throw in a Colorado Silver Bullets women's autographed baseball too. That sounds like a fair barter exchange value for value.