  We present the first luminous, spatially resolved binary quasar that clearly
inhabits an ongoing galaxy merger. SDSS J125455.09+084653.9 and SDSS
J125454.87+084652.1 (SDSS J1254+0846 hereafter) are two luminous z=0.44 radio
quiet quasars, with a radial velocity difference of just 215 km/s, separated on
the sky by 21 kpc in a disturbed host galaxy merger showing obvious tidal
tails. The pair was targeted as part of a complete sample of binary quasar
candidates with small transverse separations drawn from SDSS DR6 photometry. We
present follow-up optical imaging which shows broad, symmetrical tidal arm
features spanning some 75 kpc at the quasars' redshift. Numerical modeling
suggests that the system consists of two massive disk galaxies prograde to
their mutual orbit, caught during the first passage of an active merger. This
demonstrates rapid black hole growth during the early stages of a merger
between galaxies with pre-existing bulges. Neither of the two luminous nuclei
show significant instrinsic absorption by gas or dust in our optical or X-ray
observations, illustrating that not all merging quasars will be in an obscured,
ultraluminous phase. We find that the Eddington ratio for the fainter component
B is rather normal, while for the A component L/LEdd is quite (>3sigma) high
compared to quasars of similar luminosity and redshift, possibly evidence for
strong merger-triggered accretion. More such mergers should be identifiable at
higher redshifts using binary quasars as tracers.
