Cost basis - Warning tax related topic

[BobC]

Didn't really need me on this one. Nicolo/raulus and Scott/Smarti5051 did a pretty good job saying mostly what I would. Try to remember what you can and/or have records and receipts for, and for everything else, estimate as best you can. Try to be reasonable and consistent in how you estimate and value things. Also, start writing stuff down if you hadn't before, especially in regard to things you're now estimating and/or allocating.

Maybe the biggest thing to make certain of when filing your federal income tax return is that everything is complete and properly filled out with no obvious omissions or mathematical errors that would otherwise cause your return to be kicked out by the IRS's system, and therefore possibly subject it to additional, actual human scrutiny. If you normally prepare and file your federal tax returns yourself, you may want to at least have someone with tax knowledge and experience look over and proofread the first tax return you start reporting these sales on, just to be safe and make sure you're not blatantly missing or doing something wrong. And unless you're a dealer filing and reporting your card activity as a business, you'll most likely be filing and reporting your card activity as a collector/hobbyist, in which case you don't want to show any losses for items you sold. If you are into cards as a hobby, you have to report and pay tax on any gains you may have had from your sales, but for any sales losses they aren't deductible, and you just end up reporting them as $0 gain/income on your return.

If you want more tax related info, go into the Search link, and then go into Advanced Searches. Once there, enter my username, BobC, and then hit the Search button. It will take you to all the threads I've ever posted in. Look for threads that mention or involve tax issues/questions (including threads about "vaults"), and just click on those thread links and look in them for my posts. I'll forewarn you to block out some time before you go looking, and maybe grab yourself a cup of coffee or a cold one before you sit down to begin. You'll find a lot of tax questions, issues, and topics related to the hobby are gone into in some detail. If you come up with any further tax related issues or questions, just ask. Good luck.

[BobC]

One of these days maybe I should go back through all the tax related threads I've ever posted in and put all the links to those in one new thread. That way, instead of always having to type the same or similar tax related answers and comments out in each new thread someone else starts, I can just post a link to the thread containing links to all my other tax related posts, and just say, "Read this.".

[raulus]

Welcome to the tax nerd party, BobC! Everyone seems to have been anxiously awaiting your arrival, so we’re excited you made it.

[BobC]

Originally Posted by raulus

Welcome to the tax nerd party, BobC! Everyone seems to have been anxiously awaiting your arrival, so we’re excited you made it.

LOL

You're doing a good job. I take it you've done/do taxes?

[raulus]

Originally Posted by BobC

LOL

You're doing a good job. I take it you've done/do taxes?

I am a CPA, so I get around.

[BobC]

Originally Posted by raulus

I am a CPA, so I get around.

Am as well. Been around the block a few times myself, that is for sure. LOL

Welcome, nice to have another CPA around to try explaining to everyone what they need to be concerned about. For a while I seemed to be the only one responding to a lot of tax questions from a "professional" standpoint.

[raulus]

Originally Posted by BobC

Am as well. Been around the block a few times myself, that is for sure. LOL

Welcome, nice to have another CPA around to try explaining to everyone what they need to be concerned about. For a while I seemed to be the only one responding to a lot of tax questions from a "professional" standpoint.

Well, you know how it goes. “My buddy is saving millions on his taxes by [insert totally sketchy, incredibly aggressive nonsense]. So I want to do that too!”

To which I always respond: “Would you like to be cell mates with your buddy?”

[Stupe the Second Sacker]

Originally Posted by BobC

And unless you're a dealer filing and reporting your card activity as a business, you'll most likely be filing and reporting your card activity as a collector/hobbyist, in which case you don't want to show any losses for items you sold. If you are into cards as a hobby, you have to report and pay tax on any gains you may have had from your sales, but for any sales losses they aren't deductible, and you just end up reporting them as $0 gain/income on your return.

Yes...First, thank you to all who responded constructively. This has been very helpful I'm sure to many people.

I want to be sure I understand the section above because I was thinking I could net sales out and as long as the result was not a loss, I was good. But it sounds like you're saying this:

Example using small numbers for simplicity...If I sell 10 items and seven of them sell for $1000 each (plus $7000) and the other 3 I lose $1000 each (-$3000), I pay taxes on $7000 and not the net result $4000. Correct?

[raulus]

Originally Posted by Stupe the Second Sacker

Yes...First, thank you to all who responded constructively. This has been very helpful I'm sure to many people.

I want to be sure I understand the section above because I was thinking I could net sales out and as long as the result was not a loss, I was good. But it sounds like you're saying this:

Example using small numbers for simplicity...If I sell 10 items and seven of them sell for $1000 each (plus $7000) and the other 3 I lose $1000 each (-$3000), I pay taxes on $7000 and not the net result $4000. Correct?

All depends on whether you are:

1) a dealer
2) an investor, or
3) a personal collector.

I realize that term #2 carries a lot of baggage around here, so people are loathe to suggest that they are an investor. But you might find that the tax outcomes are a lot better as an investor! Just don’t tell anyone on this board about your tax filing position.

This article might help a bit as well, in terms of understanding some of the differences:

https://frblaw.com/2022/01/04/tax-co...s-card-market/

[Stupe the Second Sacker]

Originally Posted by raulus

All depends on whether you are:

1) a dealer
2) an investor, or
3) a personal collector.

I realize that term #2 carries a lot of baggage around here, so people are loathe to suggest that they are an investor. But you might find that the tax outcomes are a lot better as an investor! Just don’t tell anyone on this board about your tax filing position.

This article might help a bit as well, in terms of understanding some of the differences:

https://frblaw.com/2022/01/04/tax-co...s-card-market/

Thank you. I will definitely read that article. But if I fall into the "personal collector" category is the answer in my example $7000 or $4000?

[raulus]

Originally Posted by Stupe the Second Sacker

Thank you. I will definitely read that article. But if I fall into the "personal collector" category is the answer in my example $7000 or $4000?

Based on the new law that is commonly known as TCJA, deductions from hobbies are no longer allowed. So you have all the income, and none of the losses or deductions.

I’m guessing that we’ll have a lot more closet investors around here…at least for tax purposes.

[Stupe the Second Sacker]

Originally Posted by raulus

Based on the new law that is commonly known as TCJA, deductions from hobbies are no longer allowed. So you have all the income, and none of the losses or deductions.

I’m guessing that we’ll have a lot more closet investors around here…at least for tax purposes.

Thank you and that certainly stinks.

I'd guess that as well. Either that or Biden will have successfully turned us all into businessmen.

Wonder what the criteria to meet is for being an investor? Holding for a certain period? I'll check the article.

Thanks again

[raulus]

Originally Posted by Stupe the Second Sacker

Thank you and that certainly stinks.

I'd guess that as well. Either that or Biden will have successfully turned us all into businessmen.

Wonder what the criteria to meet is for being an investor? Holding for a certain period? I'll check the article.

Thanks again

As outlined in the article, there’s not a distinct dividing line. It’s all facts and circumstances. In some ways, it could be as much of a question as how you view and approach it. Do you self identify as an investor? How often do you buy and sell? Do you make money at least sometimes when you do sell?

I would guess that anyone who sells even every once in a while, and makes a little money doing it on some sales is going to be fine claiming to be an investor.

Of course, all of the people running around here proclaiming that they will never ever sell no matter the price might have a harder time. But if they actually never sell, then they wouldn’t care anyway, because they’ll never have a gain or a loss, so there’s no tax consequences to them, at least under current tax law.

Now if the government gets around to implementing some of the proposals on taxing appreciated property, especially if they lower the thresholds low enough, then that would be a different scenario. But Bernie and his friends are likely to have a hard time getting that through, at least at thresholds that are low enough to effect most collectors.