Posted By:
Eric BrehmI have heard differing views on whether income tax has to be paid on the profit realized when selling a baseball card, and if so, how this income is treated for tax purposes. Does anybody have a definitive answer on this? (I am asking here specifically about income tax -- not estate tax, inheritance tax, gift tax, or state sales tax.)
My assumption would be that baseball cards are in fact considered capital assets, and thus if I sell one for a profit, I have to report that profit as a capital gain. Similarly, if I sell a baseball card for a loss, I can deduct this as a capital loss (or use it to offset gains on other transactions). I would assume that baseball cards are not considered "personal use" property, where a loss can only be deducted in the event of casualty or theft.
Given that baseball card profits are subject to taxation, another question is whether the IRS considers baseball cards to be "collectibles." This is important because collectibles are subject to a 28% tax rate on capital gains, rather than the usual 15% rate that applies to gains on other assets such as stocks. The tax code (section 408(m)) defines "collectible" as follows:
(2) Collectible defined
For purposes of this subsection, the term “collectible” means—
(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the Secretary for purposes of this subsection.
Baseball cards are not specifically mentioned, but would they fall under the catch-all definition in paragraph 2F? How do I find out what the Secretary has specified?