Quote:
Originally Posted by molenick
I am unclear how declaring yourself an "investor" or a "collector" on a tax form would change your tax responsibility if you sell a card for profit. I am also not clear where on a tax form this would be noted...there is a place for your occupation, which for most of us would be our 9-5 job. I don't see anything on Schedule D that asks if I am a collector or investor.
Maybe I need a new accountant!
[Edited to add that I just read the link from sb1 which was informative (even if I didn't understand it all). I can see the difference between someone who's job it is to buy and sell collectibles (e.g., a dealer) and someone who is buying them but whose job is something else. The investor/collector difference is still eluding me...unless it is that you can claim your occupation is "investor" and that will make a difference.
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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.