When Christian Lopez caught Derek Jeter’s historic 3,000th hit on July 9, he most likely thought that he was just being a nice guy by giving it back to the Yankee shortstop. In that moment, Lopez probably didn’t realize that his incredibly selfless gesture could lead to potentially negative tax consequences.
Did Lopez give the ball to Jeter as a gift? That could mean that Lopez made a taxable gift equal to the fair market value of the ball. How much is that ball actually worth? Fair market value is defined as the price a willing buyer would pay a willing seller for the ball. You can buy an official Rawlings MLB baseball on amazon.com for $17.30. Chump change. However, some people are estimating that Lopez could have sold Jeter’s ball for up to $250,000. Now we’re talking some serious money.
If the return of the ball is considered a taxable gift, Lopez would be required to file a Federal gift tax return for 2011, reporting the gift, and either (1) allocating a portion of his $5,000,000 exclusion from the gift and estate tax, or, if he doesn’t have any exclusion left, (2) paying gift tax of 35% on the amount of the gift.
Lopez might argue that it wasn’t a gift because he was compensated by the New York Yankees for the ball. The Yankees are reported to have given Lopez four tickets to a suite for every remaining game at Yankee Stadium this season (including possible playoff games), plus two first row “Legends Suite” tickets (which start at $550 each) to a single game on July 10. Lopez also reportedly received bats, jerseys, and other souvenirs, and got to meet Jeter himself (what is the value of a one-on-one with Derek Jeter? Maybe we should ask the new “Charlie’s Angel”, Minka Kelly, who is dating the future Hall of Famer). But if Lopez was paid for the ball, is that taxable income, the same as if he sold some stock? Four tickets to every remaining game (there were 33 remaining home games after July 9, plus any potential post-season games) in a suite can be pretty pricey. According to the Yankees’ website, “Jim Beam Suite” tickets start at $90 per game, not including post-season tickets (which, trust me, as a St. Louis Cardinals season ticket holder, jump in price exponentially), so those four seats would be worth at least $11,880. The value increases to at least $33,000 if the seats are in the “Champions Suite”, to at least $39,600 if the seats are in the “DeltaSKY360 Suite”, and to at least $72,600 if the seats are in the “Legends Suite”. Considering the fact that Lopez got the ball for free, his income tax basis in the ball was zero. That means that every dollar of value from the memorabilia, tickets, etc. that the Yankees gave Lopez would be taxable gain on the “sale” of the ball! Depending on his tax bracket, that could result in a lot of income tax–potentially New York AND Federal!
In a perfect world, a person would be able to do a good deed without any negative consequences. In our less-than-perfect world, however, people should be aware that when they are giving something to someone else, or trading for something else, there can be tax consequences they should discuss with their attorneys or accountants. In this case, the old saying might be true, that no good deed does go unpunished (at least, from the standpoint of the IRS).