Reporting sales of large $$ items

[BobC]

Originally Posted by hockeyhockey

it could also really open up the trading market. i'd personally prefer to trade all day long, since that's basically what i'm doing anyway. sell something to buy something else.

Not so fast there!

You do know that if instead of selling someone a card for money, you trade a card(s) you have for a card(s) that someone else has, that technically in the IRS' eyes you just completed a taxable sale? And that goes for whether you're a Dealer, Collector, or Investor. Now, will the IRS ever likely know about it? Probably not, unless you or the person you traded with informs them. But just letting you and everyone know, even a card trade is supposed to be reported as a taxable sales transaction on your income tax return.

And before anyone jumps on to try telling me I'm wrong because of the Like-Kind Exchange rules, please note that in regard to Section 1031 of the IRC, in the case of cards, that probably would have worked only if you and your buddy swapped the exact same card. But that was in the past anyway since the tax law changes passed and enacted when Trump was in office in 2018 also included changes to the Like-Kind Exchange rules of Section 1031 of the tax code, where going forward, Like-Kind Exchange tax treatment only applied anymore to exchanges of real estate, period!

[BobC]

Originally Posted by sb1

I have never seen any reference in filing as to being an "investor" for cards, or coins or another genre. You are either in the business of buying and selling(legit entity) and file accordingly OR you pay the "collectibles" rate on any gains realized. How does one become an investor for tax purposes?? Which I presume would claim any gains at their appropriate capital gains rate based on their income level/AGI.

If that is an option, everyone in a low or no capital gains tier would claim they were investors and not collectors, thus avoiding the higher collectibles tax rate.

Scot, I saved your post for last to respond to tonight in this thread.

The idea of someone being an Investor, as opposed to a Collector or Dealer, may not be as far-fetched as one might think. In recent years we've talked more and more about how a lot of the new money and people coming into the hobby are doing so to invest in cards and their potential upside, not to collect a particular set or complete a HOF player run, or whatever. Stories about cards and their record prices/values are now getting reported about in places like the Wall Street Journal or on CNN, so the public at large is also starting to think more about and realize their investment potential. With that kind of exposure and treatment of cards in such traditional and other sources and outlets for the investment community, you have to think the perception of cards may be changing overall, and at least in some instances be now viewed and treated as Investments, and not simply as Collectibles.

I would have no qualms arguing such a point with the IRS, and feel pretty confident that they would finally acquiesce to the position that cards can, and in some cases should, be treated as Investments.

Granted, when you look at federal tax returns, they don't so clearly spell out where and how to properly report the differences between Investment and Collectible sales on them. They both get treated as capital gain items, but the one huge difference is that Investments that sell at a loss generate capital losses, which may get deducted on a person's tax return, at least as an offset to capital gains from other Investments sold. However, if you sell an item that is strictly a Collectible (ie:sold by a Collector and not an Investor), and it sells for a loss, you cannot deduct that Collectible capital loss anywhere on your tax return, not even as an offset to Collectible capital gains.

And as far as the question about the potentially higher tax rate for Collectible capital gains, I'd have to double check, but I seem to remember the special treament for not realizing and incurring capital gains taxes on Investments sold applied only to what was referred to as qualified capital gains (ie:like the capital gains from the sales of publicly traded stocks of domestic U.S. companies). And in that case, the capital gains from the sale of cards would not likely be considered as qualified capital gains, and because of the underlying Collectibles nature of cards, the tax treatment of any capital gains on their sales would likely revert back to the tax treatment of capital gains on Collectbles, subject to the potentially higher Collectibles tax rate, whether the cards sold were considered and treated as Investments or Collectibles. Again, I think this is right, but may need to double check.

Now differentiating between and providing proof to support one's position that their cards are Investments as opposed to Collectibles isn't a straightforward and necessarily simple thing to demonstrate. You'd have to look at the owner and the collection to see how the aspects of it are specificallly treated by that owner. Though not necessarily a definitive answer, the simplest way I can think of to maybe decide what a person's card collection is, is by asking the owner where and how they keep it. And if they tell me they walk into their man cave to look at items framed and hanging on the walls or in display cases around the room, they are probably a Collector/Hobbyist and their cards are Collectibles. If they instead tell me they fire up their computer to go online and view the cards they have sitting in PWCC's vault in Oregon, they may more likely be an Investor and their cards are Investments. This is a very simplified answer to a not so simple question though, just to give an idea of how the diferrence between a Collector and an Investor may be perceived and shown. Would always suggest seeking the advice of a qualified tax professional in making any such determinations. Hope this helps to explain what all I've been talking about.

[jsfriedm]

Just wanted to point that, so far at least, it appears that if the Democrats do manage to pass the 1.85 tr reconciliation bill, they are actually more likely to lower taxes for the rich than to raise them, since the proposals for the wealth tax, higher corporate taxes, higher top marginal income tax rates, etc have been taken out, while there is a big push to increase the limit of the SALT deduction: https://www.politico.com/news/2021/1...ms-plan-521004

[buymycards]

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

Thanks for the stupid comment.

[Leon]

Originally Posted by buymycards

Thanks for the stupid comment.

I thought it was spot on.
Taking money from someone who earned it and giving it to someone who didn't earn it, is just wrong.
.

[buymycards]

Originally Posted by Leon

I thought it was spot on.
Taking money from someone who earned it and giving it to someone who didn't earn it, is just wrong.
.

Leon, I thought you didn't allow political posts. Peter's post was in a thread about paying taxes on card profits. I'm not sure why he felt the need to post a political statement.

Why are you allowing political statements on nearly every thread? I don't want to hear from the right or the left , from the conservatives or the radicals, or from the Republicans or the Democrats. You used to run a tight forum, but lately, it is anything goes.

How about sticking to cards?

[glynparson]

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

Nonsensical Keith O b is about is far left as they come but has a kick ass collection. Love how Leon lets up this right wing political trash talk.

[obcbobd]

Originally Posted by buymycards

Leon, I thought you didn't allow political posts. Peter's post was in a thread about paying taxes on card profits. I'm not sure why he felt the need to post a political statement.

Why are you allowing political statements on nearly every thread? I don't want to hear from the right or the left , from the conservatives or the radicals, or from the Republicans or the Democrats. You used to run a tight forum, but lately, it is anything goes.

How about sticking to cards?

I agree with just sticking to cards!

[MikeGarcia]

Originally Posted by obcbobd

I agree with just sticking to cards!

..

[BobC]

I hope you guys aren't upset or mad with me in regards to threads I post in that end up getting into taxes as part of this hobby/business. I post to hopefully give out information and advice in response to specific tax questions, correct or expand on posts of others that may not be accurate or fully answer a tax related question, and maybe provide helpful guidance to others just reading along. I try to keep all my tax related posts as apolitical as possible, though I may mention a politician's name or an administration involved in some tax related law or change, solely as a point of reference or contex and not to politicize or condone/condemn anyone's specific politics or point of view. Unfortunately, since tax laws are passed and enforced by our government, and our government is basically run by politicians, it is virtually impossible to entirely and completely separate the two, taxes and politics. If you all prefer, I'll just never respond to any tax questions again.

[Eric72]

Originally Posted by BobC

...I'll just never respond to any tax questions again.

I, for one, would be sad if that happened. Your posts, in my opinion, are informative and helpful.

[dacubfan]

Originally Posted by Eric72

I, for one, would be sad if that happened. Your posts, in my opinion, are informative and helpful.

+1

[ajjohnsonsoxfan]

Originally Posted by jsfriedm

Just wanted to point that, so far at least, it appears that if the Democrats do manage to pass the 1.85 tr reconciliation bill, they are actually more likely to lower taxes for the rich than to raise them, since the proposals for the wealth tax, higher corporate taxes, higher top marginal income tax rates, etc have been taken out, while there is a big push to increase the limit of the SALT deduction: https://www.politico.com/news/2021/1...ms-plan-521004

Don't know if you read all the way down to the end of your linked article...

"Even though most millionaires would receive a tax cut, people with seven-figure incomes — on average — would see their tax bills climb by $68,000, TPC estimates. That’s because one-third of millionaires would face tax increases averaging $228,000.

Aside from easing the SALT cap, Democrats are also proposing new surcharges on the very rich, with those earning more than $10 million facing a new 5 percent surtax. People making more than $25 million would pay another 3 percent on top of that.

So people above those income thresholds would typically pay more under Democrats' plan, even as they benefit from a higher SALT cap, while those making more than $1 million but not enough to face those surcharges would owe less."


Corporations and very wealthy individuals have far too many loopholes to forgo paying any taxes. Seems to me it's about time we ask them to start paying a fair share (especially on sales of their baseball cards). :-)

[BobC]

Originally Posted by Fred

I'm sorry, if someone told me I'd have to pay taxes on the potential future value of a collectible, I'd tell them to go piss off or that I purchased it expecting it to drop in value and therefore will take the tax loss for it.

Next thing you know someone will come up with an ownership tax, to be paid yearly, for having the privilege of owning some cool cardboard. Guess what - I'll tell them to piss off on that one also.

Actually Fred, such a thing has/does exist. Some states, or other taxinging authorities, may impose what is commonly known as a business personal property tax. In Ohio, where I'm from, they actually had such a tax in effect through around 2005. Luckily it was only on businesses though, but if you were a dealer, you had to add up the value of your card inventory on the last day of every taxable year, and pay a tax on the tangible inventory value. I'm not sure off the top of my head what other states may still have something similar in place.

That may be/have been one of the reasons, depending on where you lived, that you would always see businesses advertising year-end clearance sales. They wanted to clear as much inventory out as they could to pay less property tax.

[obcbobd]

Originally Posted by BobC

If you all prefer, I'll just never respond to any tax questions again.

I can't say I've read everyone of your posts fully as selling large $$ items is not something I plan on doing, however, your posts seem very informative and are definitely not the problem.

Put it this way - I cannot tell if you are a democrat or republican. :-)

[ejharrington]

Originally Posted by buymycards

Leon, I thought you didn't allow political posts. Peter's post was in a thread about paying taxes on card profits. I'm not sure why he felt the need to post a political statement.

Why are you allowing political statements on nearly every thread? I don't want to hear from the right or the left , from the conservatives or the radicals, or from the Republicans or the Democrats. You used to run a tight forum, but lately, it is anything goes.

How about sticking to cards?

How about you just scroll on you crybaby

[ejharrington]

Originally Posted by Leon

I thought it was spot on.
Taking money from someone who earned it and giving it to someone who didn't earn it, is just wrong.
.

+ 1

[mrreality68]

HI

I just play it safe and let my accountant handle the tax side. And I handle the paying the Tax side

[BobC]

Originally Posted by mrreality68

HI

I just play it safe and let my accountant handle the tax side. And I handle the paying the Tax side

Exactly the way it should be Jeff. When in doubt or facing a not so simple tax situation or question, get the help of a qualified tax professional. And, don't always wait till it is time to do your taxes before calling on one for help. To start, if it is in the middle of their tax season when you finally call, they'll already be busy and won't have as much time to help or advise you. And then, by people waiting till after the year ends before finally contacting their tax advisor, it very often makes it impossible for them to help that person because the tax year is already closed. Can't remember how many times I'd told someone I wish they'd called me before December 31.

[BobC]

Originally Posted by Eric72

I, for one, would be sad if that happened. Your posts, in my opinion, are informative and helpful.

Appreciate that.

[BobC]

Originally Posted by obcbobd

I can't say I've read everyone of your posts fully as selling large $$ items is not something I plan on doing, however, your posts seem very informative and are definitely not the problem.

Put it this way - I cannot tell if you are a democrat or republican. :-)

Good! LOL

And truthfully I'm neither a Dem or a Rep. I'm for all of us and whoever will do the best for everybody.

And when it comes to taxes, my mantra has always been - Tax evasion is a crime, tax avoidance is your Constitutional and God given right!

[Fred]

Originally Posted by mrreality68

HI

I just play it safe and let my accountant handle the tax side. And I handle the paying the Tax side

Sometimes I allow my butler to wipe the slabs of my cards to ensure there's no glare when I look at them. But I'm weary the butler could be a part time IRS agent that is waiting for me to make a mistake...

Ha - would you like some Grey Poupon with that sir?

[BobC]

Originally Posted by Fred

Sometimes I allow my butler to wipe the slabs of my cards to ensure there's no glare when I look at them. But I'm weary the butler could be a part time IRS agent that is waiting for me to make a mistake...

Ha - would you like some Grey Poupon with that sir?

Good one!

But don't laugh too hard. Once had a client who got an 8 figure payout for turning in someone that wasn't quite honest in their dealings with the government. A whistleblower can get a cut..................

[steve B]

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

I can only hope I get generally better stuff.....

Like, ok take the 10,000 1981 Topps, give them to whoever. Maybe I get back a single nice card, maybe I get back a few hundred cards from a set where I might need a few.*

It would be like a huge nationwide hobby mystery trade!




* or with my usual luck a shoebox of P-F Smurfs and bald trolls.

[Fred]

Originally Posted by BobC

Good one!

But don't laugh too hard. Once had a client who got an 8 figure payout for turning in someone that wasn't quite honest in their dealings with the government. A whistleblower can get a cut..................

Do you mean 8 figures as in $10M+ or are you counting the two far left as cents (which drops that down to $100K+ for the whistle blower payout)? If it's a true 8 figure payout, then I'm going to start watching the Monthly Pick Up threads and BST sales a bit more closely...

[BobC]

Originally Posted by Fred

Do you mean 8 figures as in $10M+ or are you counting the two far left as cents (which drops that down to $100K+ for the whistle blower payout)? If it's a true 8 figure payout, then I'm going to start watching the Monthly Pick Up threads and BST sales a bit more closely...

It was about $11M, but chopped down to almost $8M that he actually received after the attorneys got involved and took their cut. But the total pay out was a true 8 figure amount, or a 10 figure amount if you want to include the pennies.

[Aquarian Sports Cards]

Did he owe taxes on that $8 million???

[BobC]

Originally Posted by Aquarian Sports Cards

Did he owe taxes on that $8 million???

Yes!

And actually he was lucky. Normally when someone wins a case or gets a settlement that the attorneys also take a portion of, you actually have to claim the gross amount of the settlement as income, and then try to deduct the attorney fees as a miscellaneous itemized deduction, subject to some limitations. At least you used to be able to till they did away with miscellaneous itemized deductions with the 2018 tax law changes under Trump. Luckily for this taxpayer there is a special revenue ruling in effect specifically for whistleblowers that lets them only have to pick up and pay tax on the net amount they got after taking out attorney fees. Saved him around $200K-$300K or so if memory serves.

[Aquarian Sports Cards]

I'm just imagining the scenario of him not paying on his 8 million and getting reported by a whistleblower who then makes a million, who doesn't pay and gets reported by someone who makes $80,000 who doesn't pay...

[Gnep31]

A lot of great information. Thanks for the thread!

If voting on the poll my vote is: I would never let the gov't steal even more of my $ if I could avoid it.

I won't sell on Ebay or anywhere else because of the fees, record of sale, potential taxes etc.

Full disclosure...I haven't sold anything in decades as my wife can attest...LOL. When it does come time to sell the deal(s) will be in person cash sales.

One question I do have for the group.... What about a small collector who sets up at a local card show? Most don't have a business license. Are they expected to pay taxes?

[BobC]

Originally Posted by Gnep31

A lot of great information. Thanks for the thread!

If voting on the poll my vote is: I would never let the gov't steal even more of my $ if I could avoid it.

I won't sell on Ebay or anywhere else because of the fees, record of sale, potential taxes etc.

Full disclosure...I haven't sold anything in decades as my wife can attest...LOL. When it does come time to sell the deal(s) will be in person cash sales.

One question I do have for the group.... What about a small collector who sets up at a local card show? Most don't have a business license. Are they expected to pay taxes?

What kind are you asking about?

Income tax..........sales tax..........both..........something else??????

[Hankphenom]

Originally Posted by Leon

I thought it was spot on. Taking money from someone who earned it and giving it to someone who didn't earn it, is just wrong..

Sure, if you're talking about robbery, what idiot would be in favor of that? But how about taking some of your inherited wealth or lottery winnings to help people who are paralyzed or wasting away with Lou Gehrig's disease? Not so simple or "spot on" in reality. Any of us who pays taxes allow some of our money to be taken and given to others in one way or another, presumably to benefit society as a whole and therefore us, also. And we all know that some of it--maybe a lot of it--goes to those who game the system and don't really need it, but we do it anyway to help those who do need it. I think Jesus would approve.

[tschock]

Originally Posted by Hankphenom

Sure, if you're talking about robbery, what idiot would be in favor of that? But how about taking some of your inherited wealth or lottery winnings to help people who are paralyzed or wasting away with Lou Gehrig's disease? Not so simple or "spot on" in reality. Any of us who pays taxes allow some of our money to be taken and given to others in one way or another, presumably to benefit society as a whole and therefore us, also. And we all know that some of it--maybe a lot of it--goes to those who game the system and don't really need it, but we do it anyway to help those who do need it. I think Jesus would approve.

False equivalency. Big difference between voluntary giving and involuntary giving. No earthly consequence if I don't put a dollar in the collection plate, is there.

[Frankish]

Originally Posted by mrreality68

I just play it safe and let my accountant handle the tax side. And I handle the paying the Tax side

Here, here.

[Hankphenom]

Originally Posted by tschock

False equivalency. Big difference between voluntary giving and involuntary giving. No earthly consequence if I don't put a dollar in the collection plate, is there.

So all contributions to the systems everybody benefits from: roads and bridges, water, waste management, national defense, police and firefighters, and on and on, should be voluntary?