How do you navigate the tax burden of selling expensive cards?

[Hordfest]

Originally Posted by BobC

The big difference between a "collector" and an "investor" is that if you sell a baseball card you can argue you treated as an investment, and it sells for a loss, you can deduct that loss against other taxable gains on your return, and potentially all other taxable income on your tax returns, just like if you sold a stock you owned for a loss. However, if a card you sold for a loss was instead treated as sold by a "hobby collector" as a pure collectible, and not as an investment, you cannot deduct any of that loss against taxable gains, or any other taxable income on any of your tax returns.

Another potential difference is the max long term federal capital gains tax rate on selling investments, like stocks, which is capped at 20%. The max federal LT capital gains tax rate on a collectible is capped at 28%. The trick is to be able to prove that your cards are investments and not collectibles, which isn't necessarily a slam dunk and easy to do if you get questioned about it by the IRS. There can be some risk involved in trying to push the investor/investment side.

Thanks Bob! You seem to be the resident accountant around these parts. Lots of reading to do for me.