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Taxes And Karma At The Ballpark

When you write a story about Alex Rodriguez and good sportsmanship, anyone familiar with the Yankees player might assume they know how he will figure into the narrative.

But A-Rod’s past issues don’t serve as an excuse to deprive him of empathy and civil treatment. In the wake of a recent career milestone, it isn’t Rodriguez’s sportsmanship that has been called into question. In this particular instance, it’s a fan who is setting himself up to prove that while virtue may not always be its own reward, avarice comes at a cost.

In Boston last weekend, Rodriguez hit his 660th home run, tying the great and beloved Willie Mays for fourth on the all-time career home run list. Unlike Mays, Rodriguez reached the milestone under the shadow of his mistakes, including a suspension last year for using performance-enhancing drugs. Largely due to the scandal, the Yankees have declined to pay Rodriguez an ostensibly optional bonus to publicize his new record. At The Wall Street Journal, Jason Gay offered a tongue-in-cheek list of other potential gifts for the milestone, including a “ride to La Guardia” and a “bag of potatoes signed by Derek Jeter.”

Absent from the list? The ball Rodriguez hit to secure his new position on the all-time home run list.

The fan who caught that ball has indicated he has no intention of giving it to A-Rod, despite the efforts of both the Yankees and their opponents, the home team Red Sox. Mike Shuster, the fan in question, declined an offer of signed memorabilia from both teams, choosing instead to hang on to the ball for now. Rodriguez, asked about trying to get the ball back, said, “I haven’t been good at negotiating, so I’m going to quit on that.” For his part, Shuster started a Twitter account soliciting ideas for what he should do with the ball; he has mentioned options ranging from selling it to blowing it up and posting the video of the explosion on YouTube.

For most of us, baseball is something we enjoy watching in between doing other things. But to a major league player - any major league player - the sport is not only a central component of his life, but also the peak of his professional career. The rest of us have many things in our lives more important to us than baseball. Apart from family and other loved ones, a player may have only the game and his achievements within it.

We should keep that in mind when we consider a fan’s refusal to surrender a ball of great personal significance to a player, whether it’s the one he hit for his first major league home run or, in A-Rod’s case, the one he hit for his history-making 660th.

But if common decency isn’t enough to induce a fan to trade a meaningful ball back to a player in exchange for a nice assortment of swag, we can consider the legal and tax issues at play.

If I walk down a street and drop my wallet, and you pick it up, the wallet does not become yours. You do not legally have the option of negotiating a price for returning it to me or of choosing to keep it. This is true even if the wallet happens to fall onto your lawn or through your parked car’s open window and into the front seat.

There has been much debate, but surprisingly little case law, over the ownership of a ball that is batted into the stands of a major league stadium in situations where either a team or a player wishes to retrieve it. Everyday experience in other contexts would lead us to believe that a fan must surrender the baseball if asked, just as fans routinely do when a football or basketball lands among the spectators.

But Major League Baseball has a long tradition of generosity toward its fans in this regard. In nearly all cases, a batted ball remains with the fan who retrieves it with the sport’s blessing. Players and coaches are, in fact, encouraged to toss balls into the seats after they are fouled off or caught for an inning’s final out. The practice is good public relations.

Most of the cases about ball ownership have centered on contention between fans, not between a fan and a team or a player. For instance, Barry Bonds’ record-making home run in 2001 led to a legal battle between two fans who laid claim to the ball. The court opinion described the scramble for possession as “an out of control mob.” That case suggested that the ball was intentionally abandoned property when it entered the stands; neither Bonds nor his team, the San Francisco Giants, evidently tried to retrieve it. The judge ultimately ended up ordering the two men to sell the ball and split the proceeds.

Some commentators, notably J. Gordon Hylton of Marquette University, have concluded that the purchase of a ticket to a major league game comes with an implied contract that allows a fan to keep any ball he or she might recover, based on tradition. I am not convinced, though. A central element of a contract is consideration: You have to pay for what you get. Except on certain giveaway days, ballclubs do not promise to deliver anything for the price of a ticket except a ballgame. Even an appearance by a star player is not guaranteed; I might go to a game expecting to see my favorite pitcher take the mound, but if he’s scratched, I don’t have a right to demand my money back.

The way I see it, a recovered baseball that a fan is allowed to keep is more properly understood as a gift. But gifts are made at the discretion of the giver, and they are not made until the giver relinquishes any claim on the property in question. My view is consistent with the fact that baseball teams do not report the value of souvenir balls to the government for income tax purposes.

Consider the contrary view, for a moment. Major League Baseball and its franchise clubs are, of course, engaging in a business. In the United States, businesses are required to report on Form 1099 any payments they make to an individual when those payments exceed $600. The 1099 must include the recipient’s name and Social Security number. An ordinary foul ball is not worth $600, so unless a given fan collects a bushel of them over the course of a season, this is not an issue. It might be a concern for Zack Hample, who has reportedly caught nearly 8,000 major league balls since 1990; most fans have nothing to worry about, regardless of whether or not the balls are gifts.

But if A-Rod’s 660th home run blast has a market value over $600, as its holder almost certainly has reason to believe it does, then its transfer is either a gift or a taxable event. If it’s the latter, a typical fan would be forced to sell the souvenir immediately in order to generate enough cash to pay those taxes.

This question is not purely hypothetical. When Matt Murphy caught his souvenir ball - another Bonds record, this time his 756th career home run - some tax experts warned that the ball could be counted as income, as well as potentially triggering capital gains taxes. Murphy chose to sell the ball rather than waiting to find out whether the Internal Revenue Service would characterize the catch as a taxable event. The agency declined to comment at the time, perhaps partly due to the embarrassment it suffered a few years earlier when its officials said a ball returned to Mark McGwire might still subject the fan to taxes. Under public ridicule and criticism from politicians, the IRS promptly backpedaled on that position.

Even giving the ball back is not a guarantee of avoiding a tax mess, though. Christian Lopez, the fan who caught Derek Jeter’s 3,000th hit, was largely praised for his choice to give the ball back to Jeter. In gratitude, the Yankees gave Lopez signed Jeter memorabilia, as well as a chance to meet Jeter in person and tickets to the remaining home games and postseason games for the year. While Lopez was fairly evidently in the clear on returning the ball, tax experts at the time disagreed on whether he faced taxes on the swag and tickets he received in return. (Miller High Life promptly stepped in and, as a goodwill gesture, offered to cover Lopez’s tax bill if the IRS pursued him.)

So Shuster may end up selling the ball, foregoing the YouTube pyrotechnics to avoid a struggle with the tax authorities. One estimate puts the ball’s current value between $15,000 and $20,000; while this is substantially less than pre-scandal A-Rod memorabilia, it is still a big enough price tag to give most fans pause over potential tax consequences. Given the size of his contract with the Yankees,
A-Rod would have a good chance of becoming the top bidder in such an auction. So, as ungenerous as this outcome might seem, at least the trophy would potentially end up back with the person likely to value it most.

Taxes and law aside, to me the bigger principles at work in this story are karma and justice. Giving a souvenir that you did nothing to earn back to the person who most treasures it will nearly always be the right thing to do. The universe has a way of rewarding us for our good deeds.

And then there’s also that tempting collection of swag.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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