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Originally Posted by Leon
+1. I had known about the FF not counting but some of the other stuff was new to me. (and I changed the title, you're welcome)
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Okay Leon, now I'm curious, so what did you learn?
I'll add a little bit of estate planning for you in regards to gifting as well. If you don't ever plan to sell all of your collection, you'll end up leaving it to your family in most likely one of two ways, either as a gift while still alive, or inheritance after you pass.
The advantage to gifting it to someone is that it is then out of your future estate, and any future appreciation belongs to whomever you gave it to. However, on the downside, when you gift your collection to someone while you're still kicking, your original tax basis gets carried over to the person you gifted the collection to. So if you had a card in your collection that you pulled from a pack say 50-60 years ago, a portion of that original pack cost is the basis used by the person you gifted the card to that they use to determine how much they made/lost should they subsequently sell the card. So as a result, it would potentially make everyone's life easier if when gifting your collection to someone, you also give them your tax basis so they have it going forward. When you then go to determine if you have to report the gift for gift tax purposes, you don't use your basis though. You have to use the current FMV of the collection to determine if you exceeded the annual gift exemption amount, and if so, then file a gift tax return. The FMV is also used to determine if you then currently owe any gift tax on the gift. (And if you do currently end up owing any gift tax, that gets added onto the tax basis of the collection you just gifted to someone.)
If you wait to leave your collection to your family as part of your estate, you now use the FMV of the collection as of your date of death to figure if there is any inheritance tax due. But for whoever inherited the collection, they get a stepped-up basis in the collection also equal to its FMV at your DOD, not your carryover basis they would have gotten had you gifted it while still alive instead. So theoretically, if whoever inherits your collection goes to sell it right away, the stepped- up basis they inherited from you should be about what it sells for, so there should be little or no gain to pay tax on. However, if you gifted it, the person selling uses your old tax basis, and not the FMV at the time of your gift, to determine how much they made on the subsequent sale, and are more likely to end up with significant income, and as a result, tax due.
Now this is basically how it works under current tax law, but can always change, so one needs to keep that in mind. And you also have to consider the lifetime estate and gift exemption amount in your planning as well. As I previously mentioned in an earlier post, that lifetime exemption amount is already scheduled to get cut in half in 2026, when a lot of other things passed as part of Trump's tax law changes from back in 2018 are also going to go away.
So there you go, some simple Estate/Gift Planning 101 for everyone. Very, very basic stuff though. So would still advise to seek more help regarding everyone's own particular unique situation and circumstances.