Points will be awarded for identifying the issues, the law that applies, and a significant percentage of the points awarded will be based on a thoughtful communication of your conclusions and ultimate advice. Please cite any legal or administrative support you utilize to reach conclusions.

Assume that in 1998 you were practicing tax for a major firm in St. Louis. Further assume that a city favorite, Mark McGwire, first baseman for the Cardinals, was a client of yours. On 9-8-98 Mark made history by hitting his 62^nd home run of the season. That home run broke the then-record of 61 home runs set by Roger Maris in 1961. As a result of the events that followed, McGwire sought advice for himself and an employee of the stadium where he played.

The ball was retrieved by Tim Forneris, a 22-year-old grounds crew member at Busch Stadium. In a ceremony following the game, he went up to McGwire, who was at the microphone, and gave the ball to him, stating, Mr. McGwire, I have something here that belongs to you. He handed the ball he retrieved to McGwire.

Though that act shocked the majority of the sports world. The value of that ball was a hot topic leading up to the actual home run. There were collectors, auction houses, and others, that estimated the ball would likely fetch at least $1 million dollars if sold at auction.

The Cardinals, likely not prepared for such an act of selflessness, provided Forneris a souvenir Rawlings bat and a 1999 red minivan displaying the license plate NO 62. He also received a key to his hometown in Illinois, a free dinner and souvenir items from the All-Star Caf in New York, a free trip to Disney World in Florida, and hundreds of one-dollar bills by mail from baseball fans around the world.

1. Do either McGwire or Forneris have gross income based on these facts? If so, can you determine how much?
2. Suppose Forneris kept the ball and placed it in a safe, never selling it despite qualified offers of $1 million, or more. Does Forneris have gross income at any time as a result of these offers?
3. Assume Forneris keeps the ball in his safe. Three years later Barry Bonds breaks McGwires record, causing the value of the ball kept in the safe to plummet. What are the tax consequences from the value of the ball dropping?
4. Would your answer to either A or B be different if Forneris was not an employee of Busch Stadium, but instead a fan that had simply purchased a ticket and caught the ball?