Pujols’ 700th Sold, Judge’s at Auction

Albert Pujols’ 700th career home run ball was sold at auction for $360,000. The owner, a southern California resident, will owe federal tax at short-term capital gains rates (his marginal tax rate), since the ball was sold within one year of taking ownership. He will also owe tax at his marginal rate in California, as all capital gains in California are taxed as ordinary income.

This means some, if not all, of the sales price will be subject to a 35% federal tax rate and 10% California state tax rate. On top of that, some of the proceeds will be subject to the Net Investment Income Tax (NIIT) at 3.8%. A cumulative tax rate just around 50%, ouch.

The owner of Aaron Judge’s 62nd home run ball has also decided to sell the ball at auction. It is currently for sale and expected to sell for more than $3 million. He will owe a majority of tax at the 37% federal rate (plus 3.8% NIIT), but will owe no state tax, as he is a resident of Texas.

Neither owner decided to take advantage of long-term rates nor the possibility of leaving the ball for a beneficiary with a stepped-up basis. While these are much more advantageous from a tax-planning perspective, I am not sure I can blame them, seeing as records and milestones can always be broken.