Are Derek Jeter’s Gifts Taxable?
Derek Jeter made the rounds receiving gifts from each team he played against this year.The Yankees ended up providing the grandest of prizes on Sunday. Question: Are these gifts taxable to him?
For starters all gifts to his Turn 2 Foundation, Inc. are tax deductible as charity contributions by the payer and not taxable to Derek. The Foundation is a qualified charity and operates in accordance with IRS regulations.
If the gifts to Derek were completely gratuitous, then they would not be taxable to him. However, they would also not be deductible by the teams making the gifts. Actually, $25 would be deductible since that is the limit for business gifts, but that’s it.
If the gifts were made in the expectation that services would be provided by Derek, then they would be taxable as compensation and fully deductible by the teams. The taxable income would be determined by the value of what Jeter received. Old stadium seats, framed patches and game tickets and other items that had no or minimal cost to the team would still be valued and that is the amount Jeter would be taxed on.
It would seem that the gifts were payment in conjunction with the promotion of Jeter being there to receive the gifts. This looks like work to me, so he would be taxed on what he received. He would also be subject to state taxes where the paying team was located.
If Derek decided to keep the gifts, then it ends there. However, if he donates them within a year, to a museum or other public charity, he would get a tax deduction for either the lesser of his cost, i.e. the amount he was taxed on, or the value at the time of the donation. However, if the donation was made more than a year after receipt, and the property was considered as either a capital asset or a collectible, then he could get a tax deduction equivalent to the value at the time he made the donation (provided the organization he gave it to retained the property in its collection or for its use.) If the charity sold the property pretty quickly (within at least three years), or had it offered in a “charity” auction, then his deduction would be treated the same as if he donated it within a year after receiving the property. If the value of any individual item was over $5,000 he would need a certified appraisal in order to get his tax deduction. He would also need to file Form 8283 page 1 and Parts III and IV on page 2. Charitable donations are also limited based on adjusted gross income and the form of gift that is made.
If Derek decides to sell the gifts at a later time, all income, i.e. the amount received in excess of his basis, would be taxed, but the collectibles would be taxed at a 28% federal capital gains rate instead of the ordinary income rates.
If it is determined that the gifts were not taxable to Jeter, then his basis for any later sale, if that occurs, will the lesser of the donor’s cost basis or the fair market value at the time the gift was made.
Ain’t taxes fun!
How Can We Help?
