The afterlife: Where do comics go when you die? 2 2

[Sqeggs]

The key, I think, is how much trouble your heirs want to go to.  Sounds as if yours probably would like to avoid a hassle (mine certainly will).  In which case, your best bet might be to contact one of the auction houses and consign the whole thing, letting them make the call on what should be graded (and getting that done), which raw books should be sold individually, which in lots, and so on.  Their incentive to maximize the value of your collection may be better aligned with your heirs' interests than would be the case with a dealer.

[Sqeggs]

2 hours ago, Sqeggs said:

On 10/21/2017 at 7:07 PM, Dr. Love said:

Taking it a step further.  This will create a taxable, a reportable event.  Even if cash, the obligation is to 1040 it, either as a hobbyist or a dealer, hobbyist I would assume.  Each has its tax implications.  So someone will need to know the basis, the cost of the books, against which the proceeds will be applied.  Point them to a file somewhere that has that single number, however it's documented.  But not to worry too much, there is always a default basis for the book, it's the cover price!  If you paid more than that, your heirs would benefit from knowing that.  It doesn't mean you have to go over that number now.  But that number at that time will also help guide them by providing a context to evaluate offers from dealers. 

My impression is that collectibles get the same step-up as other assets, so capital gains shouldn't be an issue.  Might be worth double checking, though.  

Mulling this over, I'm not sure what the basis would be.  Presumably it's FMV at the time of your death, but do the prices received in an auction held within, say, a year of your death establish FMV -- thereby eliminating any capital gains?  I don't know, but I'm sure Heritage does, if you want to give them a call and discuss it with them. 

Edited October 23, 2017 by Sqeggs
Typo

[rjpb]

37 minutes ago, Sqeggs said:

Mulling this over, I'm not sure what the basis would be.  Presumably it's FMV and the time of your death, but do the prices received in an auction held within, say, a year of your death establish FMV -- thereby eliminating any capital gains?  I don't know, but I'm sure Heritage does, if you want to give them a call and discuss it with them. 

A good reason for having the collection assessed at maximum value by the estate at the time of inheritance, unless you risk triggering estate taxes. 

[rjpb]

And also for having the executor liquidate the assets if one is planning to do so short term anyway.

[Dr. Love]

ah yes the step up - that's why these things are better left to professionals.  Since I've been filing on this for the last five years as business income I've tended to stop thinking of books as assets that generate gains/losses as a hobbyist would.

Brings to mind another issue though - theoretically would a comic collection not transferred specifically to a trust have to undergo probate before the assets are free to liquidate at the stepped up basis?

One other thing to know - a real useful tool exists for collectors, a FMV generator.  Lone Star (MCS) lists a public buy price for a sizable % of the comic market.  Theoretically that would generate the gain/loss for a sale happening some time after the step up event.  But generally I would say I agree, not a taxable event.

That's a pretty big thing to get wrong.  Thanks Tony!

[Sqeggs]

As long as my accountant doesn't die before I do, I figure I (and my heirs) are good! 

[EC ed]

38 minutes ago, Sqeggs said:

As long as my accountant doesn't die before I do, I figure I (and my heirs) are good! 

Accounting.  

[sfcityduck]

Steve,

This is an important discussion.  Maggie Thompson's written on the subject of older collectors unloading their collections and I think there might have been a panel about it on SDCC.  It's a topic that clearly is more and more important as the first and second gen collectors retire and age.  Knowing that you have some young kids and are nowhere near retirement age, I see your problem as different.  Yours is the problem of what help can you give your wife, who, if you unexpectedly died, would find herself bereaved, comforting your children, and trying to chart a financial path forward.  Hopefully, you have life insurance in a sufficient amount to pay off your mortgage, but your wife may be left trying to figure out how to fund college for your kids, etc.  So here's my advice:

(1) Tell her to sell back The Nightingale to me (I'll also take your best SOTI, POP, and CCA materials if she wants);

(2) Then, and only then, tell her to contact a specific dealer experienced with that kind of material, that you have chosen and can trust, and refer her to that dealer to sell your high value comics.  You'll need to make a list of the high value comics and update it when you buy new ones or sell existing ones.  For the remainder of the collection, tell her a general value that you'd expect it to be worth, and identify a more local dealer or a dealer willing to deal in bulk that you think would give here a fair value in a bulk sale.  Make clear to her that she should not attempt to piece out or eBay the comics since she doesn't know what she's doing.  Assure her it is ok to unload the remaining comics in bulk so that she and your children gain the benefit of the money.  Give her the piece of mind of knowing that you considered the situation and she should feel zero guilt about selling your comics.

(3) Finally, if you want to leave certain comics to your kids for sentimental reasons, make sure you have a list of those comics and let your wife know which they are.  (REMEMBER: DO NOT INCLUDE THE NIGHTINGALE ON THIS LIST!)

(4) Store the original lists safely with your comics and put copies of the lists (along with copies of your insurance policies) somewhere off-site (bank deposit box or with parents etc.) in case the originals get misplaced.

[Sqeggs]

1 hour ago, edowens71 said:

1 hour ago, Sqeggs said:

As long as my accountant doesn't die before I do, I figure I (and my heirs) are good! 

Accounting.  

I found mine years ago in the Yellow Pages under "Crafty New York accountants."  You'd be surprised at how many pages of listings there were. 

[lou_fine]

On 10/22/2017 at 5:41 AM, telerites said:

With over 3000 slabbed books and roughly 25000 raw books, a few pieces of OA plus an entire climate controlled storage of vintage toys, games, figures, and other collectibles, I worry about the headache I will be leaving.

If you are the avid collector and see the disposal of your collection as a big headache, just imagine how your novice uninterested daughter would feel if all of this "inventory" was dumped onto her lap to take care of.   

Hopefully, she won't have to worry about this for a few more decades yet.   

[telerites]

1 hour ago, lou_fine said:

If you are the avid collector and see the disposal of your collection as a big headache, just imagine how your novice uninterested daughter would feel if all of this "inventory" was dumped onto her lap to take care of.   

Hopefully, she won't have to worry about this for a few more decades yet.   

Yep, that was the point of my post - I hate leaving her with the headache and that is why I am trying as my health allows to catalog it and even sell off some to leave as much liquid inheritance as possible.  

Thanks for the support and thoughts.  

[n2wdw]

I'm not an expert, but everything under $5M (or so) passes without estate taxes, so there is an advantage to not sell before you die.  So, if you sell before you die, you take the tax hit, whereas if you pass it as part of your estate after you die, there's no taxes (unless of course your estate will be over $5M -- and I think it's double that for you and your wife -- and if Trump has his way, estate taxes will go away completely).

The other reason I don't want to sell before I die is I want to be able to enjoy my collection in my golden years.  I get a lot of enjoyment and, frankly, comfort, out of my collection.  My collection makes me feel good.  So I will keep it until I die.

After I die, my wife/kids can do anything they want.  I've given some thought to this (and I need to discuss it with the wife and kids), but I keep my collection in ComicBase.  So, they can easily run a search to identify all the comics worth more than, say, $500.  For those, I'd suggest they hand them all over to one of the auction houses.  For everything else, I'd suggest they contact a few of the big comic dealers listed in Overstreet and get some offers.  I frankly think it will be pretty easy to sell the comics and original art.  It will be harder to sell all my other stuff (toys, books and statues), but except for a few exceptions that stuff isn't worth much (they'd be lucky to get 50 cents on the dollar, and probably more like 20-30 cents).  I'd suggest they sell the comics and OA first, and then offer everything else on Craig's list.

The other reason I don't want to sell before I die is, what if my wife and I need the money in retirement?  I hope to have a big enough nest egg to last until I die, but if I don't, my comics will be an asset I can cash in so I don't have to burden my kids. 

Edited October 24, 2017 by n2wdw

[marvelmaniac]

I did this a couple of years ago..

Re-Graded/Cataloged/Photographed 3600 books, the pics and lists are stored on my computer and two separate flashdrives.

Who gets what is laid out in my will and I left specific instructions on caring for/handling/grading and selling comic books with notes on where to find specific info such as the Overstreet Grading and Price Guides and online links to places such as My Comic Shop/Comic Connect, etc and where to find all of the info on my computer/flashdrives.

My Son/Daughter and Sister each received a sealed copy of the will.

I also feel that unloading your books now as to not burden your family is silly, why should I stop living and enjoying my hobbies now just because I am getting older and may die in the next 10-15 years...???

You could die tomorrow so that rational says you should never start collecting things or doing anything that may burden your family in the first place.

[n2wdw]

Been thinking about this and I think I’m wrong about taxes.  Selling will create a taxable event, you just won’t get taxed twice if you sell now and then transfer the money to your kids when you die.  But this is a question for the accountant for sure.

[Sqeggs]

3 minutes ago, n2wdw said:

Been thinking about this and I think I’m wrong about taxes.  Selling will create a taxable event, you just won’t get taxed twice if you sell now and then transfer the money to your kids when you die.  But this is a question for the accountant for sure.

I think the key point is that your heirs can step up the price from what you bought the book for to what FMV is at that the time of your death.  That Action 9.2 you bought off the stands for $0.10 would have a basis of $6 mill for them, so they duck the capital gain on the sale.  But if you sell now, you pay capital gains on the price increase:  $6 mill - $0.10. At least, I think that's how it works.  Once I'm gone, I'll ask St Peter for dispensation to make one last post to the boards confirming or revising this analysis. 

[lou_fine]

On 10/24/2017 at 2:21 AM, n2wdw said:

I'm not an expert, but everything under $5M (or so) passes without estate taxes, so there is an advantage to not sell before you die.  So, if you sell before you die, you take the tax hit, whereas if you pass it as part of your estate after you die, there's no taxes (unless of course your estate will be over $5M -- and I think it's double that for you and your wife -- and if Trump has his way, estate taxes will go away completely).

 

19 hours ago, Sqeggs said:

I think the key point is that your heirs can step up the price from what you bought the book for to what FMV is at that the time of your death. That Action 9.2 you bought off the stands for $0.10 would have a basis of $6 mill for them, so they duck the capital gain on the sale.  But if you sell now, you pay capital gains on the price increase:  $6 mill - $0.10. At least, I think that's how it works.  

No tax expert here, but this does not appear to be correct.

Are you guys trying to say there is no capital gains taxes if the asset (i.e. comic books in this case) passes to your children?  This does not sound right as I believe they would still be liable for the resulting capital gains once they sell the asset, even if there are no estate taxes. 

Otherwise, why would anybody sell their comics when they are in retirement stage and have to pay taxes on it, when they can simply pass it onto their children tax free after they are gone? 

[Sqeggs]

33 minutes ago, lou_fine said:

No tax expert here, but this does not appear to be correct.

Are you guys trying to say there is no capital gains taxes if the asset (i.e. comic books in this case) passes to your children?  This does not sound right as I believe they would still be liable for the resulting capital gains once they sell the asset, even if there are no estate taxes. 

Otherwise, why would anybody sell their comics when they are in retirement stage and have to pay taxes on it, when they can simply pass it onto their children tax free after they are gone? 

Under U.S. tax law, when you die, for tax purposes the value of an asset you leave to your heirs "steps up" or increases to the asset's FMV at the time of your death.  See the Action 1 example in my previous post.  Whatever you -- the dead person -- paid for the Action 1 is irrelevant to your heirs' tax situation.  The basis for the capital gains tax your heirs pay when they sell the Action 1 is FMV on the day you died, not the price you paid for it decades ago. (Again, I throw in the caveat that I'm not an accountant, but this is my understanding of U.S. tax law.)

Canadian law may be different. 

[Old Fashion PB and J]

My wife has been told, and my family as well that in the event of my passing to speak with 2 friends (whom they all know) and they would be able to move my collection within a few weeks. Same with my car, and skateboard collection. All she has to worry about is herself and our children.  This is a big part of why my wife has always been included when I attend conventions, I am honest about what I spend on collectibles as well. It's when you downplay the collection and hide acquisitions that it becomes viewed as having little value and some guy on craigslist ends up with it for 2500.00...

[lou_fine]

34 minutes ago, Sqeggs said:

1 hour ago, lou_fine said:

No tax expert here, but this does not appear to be correct.

Are you guys trying to say there is no capital gains taxes if the asset (i.e. comic books in this case) passes to your children?  This does not sound right as I believe they would still be liable for the resulting capital gains once they sell the asset, even if there are no estate taxes. 

Otherwise, why would anybody sell their comics when they are in retirement stage and have to pay taxes on it, when they can simply pass it onto their children tax free after they are gone? 

Under U.S. tax law, when you die, for tax purposes the value of an asset you leave to your heirs "steps up" or increases to the asset's FMV at the time of your death.  See the Action 1 example in my previous post.  Whatever you -- the dead person -- paid for the Action 1 is irrelevant to your heirs' tax situation.  The basis for the capital gains tax your heirs pay when they sell the Action 1 is FMV on the day you died, not the price you paid for it decades ago. (Again, I throw in the caveat that I'm not an accountant, but this is my understanding of U.S. tax law.)

Canadian law may be different. 

Well, this is definitely very interesting.

Sounds to me like this is just another huge tax avoidance shelter for the wealthy class then.  Especially if the Trump tax changes passes and all estate taxes are also eliminated.  Sounds very unfair, but what else is new, that the wealthy can pass millions upon millions down to their heirs, whether it be in the form of property holdings, investment comic books, fine art, equity stock portfolios, etc. without having to incur any taxes on the gains, while the working class trudges along paying the bill for everything. 

[sfcityduck]

38 minutes ago, Sqeggs said:

Under U.S. tax law, when you die, for tax purposes the value of an asset you leave to your heirs "steps up" or increases to the asset's FMV at the time of your death. 

The public policy rationale for this rule historically was to ensure that an Estate was properly valued for purposes of the Estate Tax.  Using the Action 1 example, if it was bought for a $25,000 in 1980, but is now worth $5,000,000, then it will be valued at $5,000,000 for purposes of the valuation of the Estate and Estate Taxes.  Thus, when the comic passed to the heirs, having already been appropriately taxed, it would get the stepped up basis.

If there's no Estate Tax assessed, that obviously works a windfall for the heirs who get a stepped basis and pay no taxes if they immediately sell the asset.

Of course, many long time collectors nonetheless want to sell off their comics before they die for a variety of reasons:  (1) to avoid the hassle to their heirs, (2) because they want to ensure the value of the collection is maximized, (3) to ensure the liquidation benefits dealers or fellow collectors of their choosing, and, most obviously, (4) so they can reap the benefits of the money while still alive.  Avoiding taxes is not an overriding consideration for many folks.