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Tax implications on selling a collection

29 posts in this topic

Hi,

 

I was wondering if there is anyone on the forum who has any advice what the tax implications when you sell a collection?? If you show a loss compared with FMV does that negate or mitigate the tax impact? What documentation would you need to show that this was a loss and therefore is not income or is it irrelevant? Is there a dollar amount that comes into the formula?

 

Thanks

 

Bernard

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Thank you

 

That makes sense so if the total spent is less than the total received then that would equate to the loss. The tax laws do not look at the opportunity loss but rather the actual cost (purchase price) versus the selling price. That delta would be the taxable amount - correct?

 

Are hobbies thought of any differently?? In business you not only have the cost of the inventory but overhead as well. Would it be acceptable to allocate an amount to the time and effort, storage cost, bags, boxes etc. to the actual cost of the book and not just the purchase price - for a hobby as well??

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Thank you

 

That makes sense so if the total spent is less than the total received then that would equate to the loss. The tax laws do not look at the opportunity loss but rather the actual cost (purchase price) versus the selling price. That delta would be the taxable amount - correct?

 

Are hobbies thought of any differently?? In business you not only have the cost of the inventory but overhead as well. Would it be acceptable to allocate an amount to the time and effort, storage cost, bags, boxes etc. to the actual cost of the book and not just the purchase price - for a hobby as well??

 

All expenses can possibly be a deduction but I've not heard of a time and effort deduction.

 

The percent you have to pay is definitely something you should contact a tax pro about but the tax man wants to get a portion of every dollar the collection went up compared to how much you paid for it (minus expenses which can be lengthy). Don't forget to factor in slabbing fees and shipping cost if you didn't buy them at a store.

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I'm not a tax accountant or an attorney, but I can tell you the more you start trying to reach for those deductions, the more it is viewed as a business and not a hobby. Time and Effort? Overhead? I wouldn't go there. And no, there's no "opportunity loss". It's all about realization and recognition. You buy a book for $10, spend $0.20 on bag and board, and sell for $20 then your gain is $9.80. If you sold on ebay, then you can deduct the ebay and paypal fees and shipping costs.

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You only get taxed on the profit you make, so if you report a loss, you pay $0 on taxes, keep track of your expenses in case of an audit. Most likely won't happen but alway cover your rear end. The bank will notify the IRS of any deposit over 10K, but you can't "beat the system" by depositing 3 different checks of $3333 either. :)~

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The simplest thing to do is add up your revenue, deduct your costs/expenses (i.e. legit expenses) and report the positive difference only as Income from Sale of Collectibles. Just make sure to have the backup for it in case you get a letter.

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If you're just selling your personal collection, and you're selling at a loss, then you probably don't need to claim it at all...... but you would need to be able to show the records of what you paid, to be safe. It's profit/income that the IRS is concerned with..... especially if it is ongoing. GOD BLESS...

 

-jimbo(a friend of jesus) (thumbs u

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I guess I should be more vigilant in keeping all my receipts. As a collector I am more interested in getting the book than selling so that was not my emphasis (and really did not want to know how much I was spending or more importantly others to know). But with this advice I will be more attuned to this going forward. I don't think I have my receipts from the local / convention purchases or money orders and cashiers checks.

 

I think paypal should be able to provide me with all my transaction history. Does anyone know how far back paypal goes??

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If you're really talking serious dough, it probably wouldn't kill you to talk to a cpa

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The question,..... is this to be a one time thing, or do you plan to buy and sell with profit in mind ? Paypal records will go back a ways...... mine go back for years..... maybe to the beginning, I'd have to check. It's one reason many people insist on Paypal...... it really does streamline record keeping. GOD BLESS...

 

-jimbo(a friend of jesus) (thumbs u

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Consult a tax professional for the most authoritative/correct answer. It is easier to figure out CGC grading criteria - than the tax code.

 

assuming united states------

 

 

if this is a one time sale - you are most likely on the hobby end of the IRS -

 

https://www.irs.gov/uac/newsroom/five-basic-tax-tips-about-hobbies

 

if you are planning on doing this for a business ( even a small one) as an individual - you might need to use a schedule c

 

 

https://www.irs.gov/pub/irs-pdf/f1040sc.pdf

 

 

 

whichever category you fall under -

 

 

 

make sure you have some documentation on purchase price -

 

 

If bought of the rack - easy - if not - then you have to have some level of detail on the purchase ( otherwise if audited they may default back to the cover price).

 

 

In either case - do not get cute with expenses.

 

 

 

Also - if you are running/starting a small business and have no idea what the entries on the schedule C mean and how to track and calculate the entries- GET A TAX PROFESSIONAL.

 

 

 

 

 

 

 

 

 

 

 

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Great advice by everyone.

 

I will see my accountant but wanted to make sure I had all my ducks in order and to make sure I ask the right questions and have a general understanding of what I should expect as an answer.

 

I am going to pull all of my Paypal receipts and see where that gets me.

 

I hope they do not go off of the cover price!!! That does not even sound logical on a book like IH 1 which is a 10 cent cover. But I will try to locate as many receipts as possible. looking in my emails etc.

 

Consensus is that for a hobby my time and the storage are not allowed. But storage products (boxes, bags, boards, racks etc.); grading costs; and shipping costs associated with purchases and grading. Is that correct? A

 

And going forward need to keep all receipts for tax purposes.

 

 

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Ok, stupid question but how would the IRS know if you are selling a personal collection at all? Say you sell through Craigslist or at a convention or even Ebay what triggers the IRS?

 

If you get audited and they find a $25,000 deposit you may have some explain to do. I'm assuming he will get the payment thru paypal and that has a paper trail but they may not send a 1099 if he doesn't have enough deposits over the year.

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