Chapter 9 - Gross Income Concepts and Rules
Updates
- Capital Gain Holding Period (page 287):
The IRS Restructuring and Reform Act of 1998 included a
provision to change the holding period required to obtain
a lower tax rate on gains from the disposition of capital
assets. For tax years beginning after December 31, 1997,
the holding period required for the lower capital gains
tax rates is over one year, rather than over 18 months.
- Chapter 9 Update:
In September 1998, a controversy arose as to whether a fan who catches a
record-breaking homerun baseball hit by Mark McGwire would have taxable
income. The theory is that the value of the ball increased tremendously
once it crossed the fence. This would be similar to finding money or a
treasure trove, and would consitute gross income. However, what if the
fan immediately returned the ball? Would that negate the income, or
would it just add liability for gift tax to the fan's tax obligation?
Well, both Commissioner Rossotti and a member of Congress took action.
The Commissioner issued an announcement (IR-98-56) stating that if the
fan immediately returns the ball, there is no income or gift tax
consequences. However, if the fan keeps the ball and sells it, the tax
result would be different. Congressman Thomas introduced H.R. 4522 [NOTE
- "H.R. 4522" should be linked to
http://thomas.loc.gov/cgi-bin/bdquery/z?d105:h.r.04522:] to modify the
tax law to provide that there are no income or gift tax consequences to
an individual who catchs a home run baseball and returns it to the
batter. This legislative proposal was not enacted.
Query: The ball part could have modified the terms of use for fans
during the games that McGwire played such that any baseball hit into the
stands still belonged to the team. Which approach would you recommend -
having the tax law modified, or having the ball park change the license
rules such that the fan has no ownership over the home run baseball?
Why?
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Last updated on September 1,
1998.
Tax Aspects of Business Transactions: A First Course, by
Annette Nellen
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