Tax implications on selling a collection

[W16227]

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)

 

paypal = awesome for records -

 

 

You can download all transactions into excel - it is a grand mess of data - but you can then see what you paid back to ebay for fees - ebay or paypal shipping - and you also have your individual sales.

 

[jaybuck43]

I was told if you make less than 85K during the year you sell your collection, you are exempt from the 25/28% collectible tax. Is that true?

 

Holy heck, where did you hear that??? No, that exemption does not exist.

[drotto]

For all practical purposes selling your collection is treated as a capital gain. So you take whatever your initial investment was plus the costs of "improvements." Improvements would include professional restoration or slabbing costs. Then if you sell above your added costs I think the current tax rate is 28% on the profit.

 

Granted most of us are so far in the hole if you consider amassing our collections over the years (so yes monthly comic purchases), as well as buying old issues, that there really is no profit. I have spent thousands buying new books over the years, that I could argue selling anything does no overcome my accrued acquisition costs, so nothing to report.

[delekkerste]

For all practical purposes selling your collection is treated as a capital gain. So you take whatever your initial investment was plus the costs of "improvements." Improvements would include professional restoration or slabbing costs. Then if you sell above your added costs I think the current tax rate is 28% on the profit.

 

Granted most of us are so far in the hole if you consider amassing our collections over the years (so yes monthly comic purchases), as well as buying old issues, that there really is no profit. I have spent thousands buying new books over the years, that I could argue selling anything does no overcome my accrued acquisition costs, so nothing to report.

 

1. The 28% tax rate for collectibles capital gains only applies to long-term gains (those books held >1 year). As with everything else, short-term capital gains (books held <1 year) are taxed at your tax rate for ordinary income.

 

2. While it is true that many of us have "lost" substantial amounts buying comics off the rack for years, the capital gains calculation only takes into account the gains/losses on what you are selling (i.e., "realized" capital gains). So, if you sell $5K in slabs that cost you $3K, you can't say "well, I've lost much more than $2K in monthly comic purchases, so I'm not reporting the gain". You'd actually have to sell your worthless drek to realize a capital loss to offset your gain. Also, losses can only be deducted to the extent you have gains (regarding collectibles specifically), i.e., collectibles capital losses cannot be used to offset capital gains elsewhere (e.g., for stocks) or to offset ordinary income up to the maximum allowed limit ($3,000/year). That said, capital losses elsewhere (e.g., stocks) I believe can be used to offset capital gains in collectibles.

[ComicDoc]

Thank you and I am glad to hear that it would only be taxed at the 28 % level and it is only the difference that gets taxed. I was not sure if it would have been counted as income and taxed at the full income rate.

 

If I do not have receipts for all the purchases is it permissible to use selling cost when the item was new as your cost?? For example if I purchased a statue at 50 dollars and the MSRP is 20 and I do not have a receipt to say I paid more can I at least use the MSRP as the purchase price?? Wouldn't this be analogous to using a books cover price??

[Tomega]

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 use eBay, you use Paypal or some other payment processor. According to Paypal -

 

"Internal Revenue Code (IRC) Section 6050W states that all US payment processors, including PayPal, are required by the Internal Revenue Service (IRS) to provide information to the IRS about certain customers who receive payments for the sale of goods or services through PayPal.

PayPal is required to report gross payments received for sellers who receive over $20,000 in gross payment volume AND over 200 separate payments in a calendar year."

 

 

For Craigslist, if you get a paid in cash and you deposit $10,000 or more in cash at the bank, the IRS requires the bank to complete a Form 8300. If you try to break it up to avoid the 8300, you are asking for an audit or worse.

[namisgr]

Thank you and I am glad to hear that it would only be taxed at the 28 % level and it is only the difference that gets taxed. I was not sure if it would have been counted as income and taxed at the full income rate.

 

?

 

If you're married and filing jointly, for instance, you have to earn over $230,000 in income to be taxed at a rate higher than 28%. If that's indeed your case, then you can certainly afford to have a tax accountant handle your returns and deal with your collectible gains from selling a collection.

[Sqeggs]

That said, capital losses elsewhere (e.g., stocks) I believe can be used to offset capital gains in collectibles.

 

Interesting. That I didn't know. I wonder if my accountant does?

[ComicDoc]

Thank you and I am glad to hear that it would only be taxed at the 28 % level and it is only the difference that gets taxed. I was not sure if it would have been counted as income and taxed at the full income rate.

 

?

 

If you're married and filing jointly, for instance, you have to earn over $230,000 in income to be taxed at a rate higher than 28%. If that's indeed your case, then you can certainly afford to have a tax accountant handle your returns and deal with your collectible gains from selling a collection.

 

The reason for my question was to get insight from the board members on how to best approach this issue. And if any of them had dealt with this issue before and had any lessons learned. I thought it would help me to discuss the situation with the accountant in case they have not dealt with this circumstance recently.

 

Yes, I will ask my accountant and it sounds like this is something that tax accountants deal with on a regular basis.

 

I am glad I asked as I did learn something, I did not realize that it was considered capital gains. I was falsely under the impression that the funds would be considered income and taxed at my current rate. And all the great insights on hobby versus business, appropriate write offs and what can be included in the cost of the book have been fantastic.

 

I am pleased that capital gains tops out at 28% as I am in a higher bracket and if this was added to it I would loss about 40 cents on the dollar of profit to the taxman. And if I sold the collection and miscellaneous items as a whole that (12 %) is a considerable amount of money!