I was told I needed to turn my column in early this week so that the Star could spend the weekend focusing on the important news, that being the fact that the Y2K disaster and global warming have conspired to provide Indianapolis with what seems to be a winning football team'Not since Jack Trudeau gave new luster to the term 'sack'has there been so much interest in our local football heroes'And so it seems only fitting that I too devote extra space to a commentary on the success of the Colts.
But this isn't a sports column, so I had to find a tax angle on the story of our denizens of the dome.
I'll bet you didn't realize that the IRS, collectively (so to speak), is one of the Colts'biggest fans'That's right'When the Colts hit the big time this past week and tickets were being scalped for over $500 apiece, the folks at the IRS started rubbing their hands together, contemplating the windfall of unexpected tax dollars that will be coming their way from Indianapolis.
If you sold a Colts ticket for more than the price at which you purchased the ticket, the tax rules state that the difference between the price you paid and the amount you received in the sale belongs, in part, to your friends at the IRS.
You are required to report the sale of the ticket on Schedule D of your tax return'Unless you purchased the ticket more than a year ago, the profit on the sale of the ticket will be taxed at your highest tax rate, which could be as high as 39.6%'In other words, that $400 killing you just made on your ticket sale might only be worth $242'And if you traded the ticket for goods or services worth more than the face value of the ticket, the value of the goods or services you received is just as taxable as if you had received cash.
You may find yourself asking, 'How's the IRS going to know if I scored a field goal on the sale of my football game ticket?'and the answer is, of course, the IRS always knows'The IRS is omnipresent'Their agents are out there, watching you offer your ticket for sale, counting the money as it changes hands'You can bet on it'Or not'Chances are the sale of a football ticket or two will go unnoticed'However, if you happen to have your tax return subjected to an audit and the agent finds a questionable deposit in your bank account for several hundred dollars a few days before the big playoff game, you may have some explaining to do.
I contacted my friends at the IRS Public Affairs office and asked if, in the spirit of showing support for a hard-working team that is long overdue for a championship season, will the IRS overlook the capital gains tax that will be due on inflated sales of tickets to the Colts game? Pat Brummer, senior communications specialist at the IRS Public Affairs office laughed heartily before replying, 'If it were up to me I'd say yes; unfortunately I'd have to contact my congressman.
Contacting your congressman is an important issue to keep in mind as we head into another major election year'It is the very people we vote for to represent us who make the rules that enable the IRS to charge tax on sales of tickets to football games, the 500, and other events where ticket owners can turn a profit'Every time we cast a vote for someone who refuses to work to change the tax laws, we are saying we don't mind paying tax on something as simple as the friendly exchange of a football ticket for money'Meanwhile, it's just another touchdown for the IRS.
The flip side of reporting the income on the inflated sales price of your football tickets is what your reporting responsibility is when you purchase a handful of Colts tickets from some scalper on the street'Are you required to ask the seller for his name and social security number and issue him a 1099 form on the spot, and send a copy of the form to the IRS advising them that you handed over a few thousand bucks for your tickets on the 50-yard-line? Since you're purchasing a product and not a service, Ms'Brummer at the IRS assures me that the Service would be 'hard pressed to require you to prepare any form'to report this purchase'Phew!
copyright Â© 2000 Gail Perry - Fun with Taxes