Setting up LLC for my PC 3 3

[Mike273]

Hi Everyone - 

I'm really new to this group but have been collecting for most of my life.  I've been thinking about setting up a LLC - I'd be able to deduct mileage to local cons, hosting charges, postage, bags/boards etc.   I've run a s-corp before around IT consulting so I'm not adverse to tracking expenses getting a CPA etc. 

My question is - how do you handle transferring your personal assets (big comic collection worth a lot of money) into a corporate structure?  My PC is insured at $150K - with the recent run up in prices it's probably worth more.  I'm older now and none of my kids are interested in inheriting it except a few copies for sentimental reasons (my daughter loves Hawkeye, my son wants a Garfield strip!). 

Has anyone done this before?  What was involved in doing it?  I'm afraid of opening up a tax nightmare here - over all these years I have never bothered to keep receipts and ever even thought about selling comics.  

Am I overthinking it?  Can I just incorporate, start selling, subtract my expenses and declare the rest as profit?  Or do I need to have my current collection somehow "transferred" into the corporation - the way people will do with real estate into LLC's?

 

Michael 

[OuterBanks]

 

Lol - I have thought about the same.  Here’s the best article I came up with: https://www.score.org/blog/how-transfer-assets-your-llc

It sounds like you have to have a record of what you paid for the stuff so the profit will come back to your individual tax as a capital gains tax.

 

[Lightning55]

A few observations/notes:

To deduct things you have to show an income to deduct it from, as in it's a business.  Otherwise, it's a hobby and the deductions are disallowed.  (Edit: deductions are allowed, but net losses are not allowed with hobbies).  If you show income by selling some stuff, now you have taxes to pay, probably.

I believe there is an annual fee to most states to maintain the status of an LLC or any kind of Corporation.  Could outweigh the benefit.

It will have it's own annual tax returns to do, state and federal.  More time, more fees.

If you are going to "start selling, subtract my expenses and declare the rest as profit", you can do this as a sole proprietor, no corporation needed.  It's just a schedule C situation.

 

 

Edited April 6, 2021 by Lightning55

[Mike273]

 

Am I over thinking this?  If I consigned a few comics and got a large check for a silver age key how would the IRS know?  I don't have proper records from collecting over the years TBH.

(waiting for people to lecture me about the IRS :-) ) 

Edited April 6, 2021 by Mike273

[Lightning55]

2 hours ago, Mike273 said:

 

Am I over thinking this?  If I consigned a few comics and got a large check for a silver age key how would the IRS know?  I don't have proper records from collecting over the years TBH.

(waiting for people to lecture me about the IRS :-) ) 

The IRS leaves it up to each individual to report their income, or not, at their own peril.  It is illegal not to report it.  You are free to commit tax fraud, risk getting caught or not.

If you get a large check and deposit it, in an audit you would have to explain where this large amount came from.  If it's determined to be proceeds from a sale of a collectible, you can bump your "basis" against the income as a deduction.

Your basis is what you paid for it.  No receipt?  Could be a problem getting the deduction, which might be a small amount anyway.  So after all that, you will owe the taxes on the income, failure to report penalty, and interest.

 

[csaag]

4 hours ago, Mike273 said:

 

Am I over thinking this?  If I consigned a few comics and got a large check for a silver age key how would the IRS know?  I don't have proper records from collecting over the years TBH.

(waiting for people to lecture me about the IRS :-) ) 

There's the person who bought the comic.  Say they sell it & report the gain (poss having a cancelled check to prove their cost basis). If they get get audited then the IRS would know that you sold it to them.  If they then decide to follow up on your return, they'd see that you didn't report the proceeds.  

[the blob]

On 4/6/2021 at 7:47 AM, Mike273 said:

 

Am I over thinking this?  If I consigned a few comics and got a large check for a silver age key how would the IRS know?  I don't have proper records from collecting over the years TBH.

(waiting for people to lecture me about the IRS :-) ) 

anything over $10K gets reported to the IRS

[Lightning55]

12 minutes ago, the blob said:

anything over $10K gets reported to the IRS

I think you are referring to cash deposits to a bank.  Due to anti money laundering laws, banks have to report any cash deposit over $10k to the banking commission and the Fed.

There is no requirement for any entity to report a check deposit.  It's your money, maybe earned money, maybe proceeds from a sale you actually took a loss on, maybe a loan, whatever. 

If it's income you have to report it to the IRS, like anyone else.  If you put it on a Schedule C as a business, you can deduct related expenses and not take the full hit.

[rsouxlja7]

You can deduct all of those things on Sch C without setting up an LLC. 

[Lightning55]

1 minute ago, rsouxlja7 said:

You can deduct all of those things on Sch C without setting up an LLC. 

Yes, as I mentioned in my first post.

[Mike273]

On 4/6/2021 at 7:47 AM, Mike273 said:

 

Am I over thinking this?  If I consigned a few comics and got a large check for a silver age key how would the IRS know?  I don't have proper records from collecting over the years TBH.

(waiting for people to lecture me about the IRS :-) ) 

 

Do the sellers send you 1099’s?  If so then the IRS is aware of the income.  If they are not aware of the income you are on the honor system and either a) violating IRS laws out of ignorance or b) intentionally violating them - either way it’s a risk you’re taking.

PayPal GoodsServices also issues a 1099 and in sometime all payment processors will be required to.

[Lightning55]

On 11/2/2021 at 5:26 PM, Mike273 said:

 

Do the sellers send you 1099’s?

1099 or not, if you get a check for the proceeds you are going to deposit it at some point. 

The first thing the IRS does in an audit is examine your bank statements.  Any deposit is income unless you can show otherwise.  So unless you get cash and hide it under your mattress, a sale will be glaringly visible to them.

[Aman619]

when you set up a business tp take over your personal items, in situations where the new entity is a separate entity from yourself, you cant "give" the comics, you must SELL the comics to it. This triggers income that is taxable personally in the year you do the transfer/sale.  You could start fresh with a "corporate entity" with you as owner, and start by funding it with cash.  Then do all future business under the company.  In a few years it will be a real business with transaction history and tax returns.  How you handle your "other" comics is up to you and your accountant.  Maybe consign them to the new company for selling?