On Saturday, July 9th, New York Yankees shortstop Derek Jeter became the 28th player in major league baseball history to collect 3,000 base hits. He did so by hitting a solo home run to left field off David Price of the Tampa Bay Rays in a ballgame played at Yankee Stadium. The ball was collected by a fan seated in the bleachers, 23-year-old Christian Lopez. Once it was in his possession it was his legal property.
Memorabilia is worth whatever someone is willing to pay for it, so it is difficult to say exactly how much this ball would have fetched on the open market. Some experts have placed its objective value at a quarter of a million dollars, but it would be no great surprise if someone was willing to pay much more. The fact is that none of us will know how much a willing collector would have paid for the historic baseball because Lopez chose to give it back to the Yankees for nothing.
The Yankees decided to show their appreciation to Lopez by giving him expensive season tickets for the remaining games this season as well as some comparatively pedestrian memorabilia. Estimates place the value of these items at approximately $120,000.
The problem for Mr. Lopez lies in potential tax responsibility. The transfer of assets to Lopez could be construed by the Internal Revenue Service as income. If this becomes the case, CNN is reporting that Lopez could be faced with a tax bill of up to $14,000. On the other hand, it is possible that the transfer back to the Yankees will be considered a gift. If it is, Lopez can avoid taxation by utilizing his available lifetime gift tax exemption.
For it to be considered a gift, the IRS would have to determine that the Yankees were spurred on by sheer generosity. To some it would seem as though the Yankees would not have given Lopez anything had he not provided them with the baseball, so how could you say that the season tickets and memorabilia were given in the spirit of true gift giving?
The decision made by Mr. Lopez is not for us to judge. But the discussion about the tax implications of this “transaction” demonstrates why it is advisable to consult with a financial planning attorney before agreeing to transfer assets when there are tax implications involved.