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Sunday, August 26, 2007

Taxes on Bonds' Home Run Baseball

A lucky baseball fan caught Barry Bonds' record-breaking home run ball. Many sources are saying that he would owe income tax on the value of the ball if he decides to keep it. They say he is forced to sell it to pay income taxes.

Personally, I'm confused as to why he would owe tax if he didn't sell it. He may be receiving bad tax advice.

In the US tax system, taxes are owed only when money changes hands.

I think that it should be considered an investment. His cost basis is the price he paid for the ticket to the game. When he sells the ball, he realizes a short-term or long-term capital gain, based on how long he had the ball.

The idea that he's forced to sell the ball to pay income taxes is completely ridiculous. In the US tax system, no taxes are owed until money changes hands. He shouldn't owe income tax until he sells it.

Consider this analogous situation. I buy a 1000 shares of stock for $0.50/share. The stock rises up to $100/share. Do I owe taxes? No, I don't owe taxes until I sell the stock.

My opinion is that he "bought" the baseball for his admission ticket to the game. Besides, how would the IRS know he has the ball, if his name hadn't been published all over the newspapers?


Anonymous said...


I still do not understand your quote pasted below. When the banks return the interest and profit they make to shareholders and as expenses...this is still 'money' which remains in the banking system or is used for consumption and/or investment by bank staff and shareholders right?

Also the Central Bank and all other banks when they make profits from their I right in thinking that the 'profits' are not real (as in existing, I admit I do not really know what I mean here) money, it is simply a account entry on a computer ledger (this year we have made this much extra), and again this just creates more entries in the stockholders bank them the power to wield their abstract and non existent wealth to 'buy' up resources and consume/invest?

Also I have read elsewhere that banks destroy the money once it is repaid as debt....does this mean they destroy the record that it exists, only keeping a record of the profits made from the debt?

Why does the government get money returned to it by the fed? If it is a Private entity, it is not in its interest to give money to the government, why does it not just keep it 'as profit'.


"At this step, you can already see the Compound Interest Paradox. The Federal Reserve created $1 million and loaned it out at 8% interest. However, the Federal Reserve never created the $80,000 required to make the interest payments. Later, when the Federal Reserve receives its $80,000 interest payment, it pays it out to the government or for its own expenses. This is the mistake that Flaherty and Griffin make. The Federal Reserve, when it does collect the $80,000 interest, pays it out as expenses and profits. There is a permanent $80,000 money supply shortfall. Even though the Federal Reserve and the bank will pay out their profits, the Compound Interest Paradox still exists. The books of the Federal Reserve and the bank will balance, but the books of "society as a whole" do not balance."

FSK said...

You're publishing this comment in the wrong thread. Go back to "Reader Mail #4 - The Compound Interest Paradox is Real". I think my post already answered these questions, but I'll do it again.

You really should go back an reread that post along with all my other posts on the Federal Reserve and Compound Interest Paradox.

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