Answer to Question #291344 in Accounting for Jen

Question

John, age 10, found an old baseball glove while exploring an old shed on the property of his new home. His Father, Jerome took the glove to a dealer in baseball memorabilia who verified the glove belonged to Babe Ruth. Jerome sold the glove for $75,000.

• What tax issues should Jerome consider? Write a paragraph
• Is John the owner of the glove? Should he be taxed on the proceeds? Write a paragraph
• Does John giving the glove to Jerome constitute an assignment of income? Write a paragraph

Answer 1

Solution:

i.). Jerome should consider whether the baseball glove is being sold for more than its original cost or less. If the baseball glove is being sold for less than its original cost, then no taxes will be payable, but if it is being sold for more than its original cost, then Jerome has to pay taxes on the surplus as a capital gain tax.

 

ii.). From a legal point of view, the ownership of the baseball glove left behind belongs to the seller. You are required to inform the seller of the items that are left behind, but if the seller fails to collect them for a certain period of time, then Jerome can claim ownership of the glove and either keep it or dispose of it.

Jerome should be taxed on the proceeds since he is the one benefiting from the sale.

 

iii.). John giving the glove to Jerome does not constitute an assignment of income.

An assignment of income occurs when a person voluntarily agrees to assign their income to someone else through a contract or oral agreement.