Baseball fans all over the country can breathe a sigh of relief.
No, it’s not because the Phillies managed to crank out two runs in the ninth last night to remain atop the NL East.
Rather, it’s because the darling of baseball these days, Christian Lopez, won’t be paying out of pocket for taxes after all.
In the event that you’ve been sleeping under a rock – or if you have the same level of interest in baseball as my mother – Lopez is the 23 year old New York cellphone salesman who caught Derek Jeter’s 3000th hit ball and then, remarkably, gave it back.
And if you’re even less of a baseball aficionado than my mother, Derek Jeter is considered one of the best shortstops in the history of Major League Baseball with one glaring flaw: he’s played his entire career with the NY Yankees.
Lopez could have kept the ball. It definitely has some value. Only 28 players have reached that 3,000 hit milestone, including such luminaries as Hank Aaron, Ty Cobb and George Brett.
But Lopez gave the ball back to Jeter, and to the Yankees, so that it could rightfully mark its place in baseball history in the hands of those that delivered the moment – and not on some auction block. In exchange for the rather amazing gesture, the Yankees gave Lopez memorabilia, including his own baseball card (he’s an avid collector) and a 2009 World Series ring. Lopez also received some pretty nice box seats to future Yankees games, signed balls, bats and jerseys. And all was right in the baseball world… until the IRS came knocking.
Lopez found out he may have to pay federal income taxes on the merch and the tickets. Most tax experts tend to agree that the exchange of the ball for the merch could hardly be considered a gift under existing law. The rules for gifts can be complicated but tend to focus on whether anything was received in consideration for the transfer. In this case, Lopez received quite a bit back for the baseball, making the gift argument a tough one. The IRS imposes a federal gift tax “on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.” And, of course, if it had been considered a gift, the tax burden would have been on the Yankees for that one, not Lopez.
So it’s not gift tax that Lopez has to be worried about. It’s income tax. It’s likely that the merch could be considered prize winnings, which would be immediately taxable (as Ludacris learned from Oprah). Or it could be considered goods that were exchanged for value and thus treated as a sale. Nobody knows for certain yet (though it’s definitely fun to speculate).
Depending on the characterization of the tax, estimates on the amount of the tax bill fall between $5,000 to $14,000. That’s a pretty big wallop for a guy still paying off student loans (writes the girl still paying off hers).
So a few companies have stepped up to help him out. Miller High Life (through Miller Brewing Company) has offered to cover Lopez’ tax bill. The company issued a statement last week saying:
Miller High Life believes you should be rewarded for doing the right thing, not penalized. We want to recognize Christian Lopez, and in turn everyone like him, for doing the common sense thing and help him continue to live the High Life.
And yes, Miller is likely aware that paying the tax could also be taxable. Like Oprah, Miller will likely “gross up” their contribution in order to capture the full value of the tax so that Lopez doesn’t get hit with yet another tax bill.
So, nice, right?
It gets better. In addition, Modell’s Sporting Goods (the company that got Lopez that World Series ring), has offered to help Lopez out with his student loans.
It’s a rather spectacular ending for somebody who did a pretty good thing for baseball. And the publicity for the Yanks, Modell’s and beer giant Miller Brewing Company isn’t so shabby either.
I’m just glad that Jeter wasn’t a Minnesota Twin.
