Impacts of recent Capital Gains law proposal

[chriskim]

Do you think there will be any impacts of recent capital gains law proposal? Stock markets has been tanking and investors are cashing out. Will those money move into sports memorabilia? Or investors have already loss so much money and no more free cash to invest on sports memorabilia anymore?

The main thing is profit in selling sports memorabilia also consider as capital gains and it isn't a safe heaven to avoid paying taxes!

[TobaccoKing4]

Who cares Chris? The tweets have been really nice and not offensive at all and everyone knows that's what really matters when it comes to being a great President. No one has anything to worry about

[Tao_Moko]

Nothing new. Collectibles have been considered an asset eligible for short or long term gains for some time. You can get real answers by searching google for the same question posed here. Just make sure it directs you to irs.gov.

[Vintageismygame]

Originally Posted by TobaccoKing4

Who cares Chris? The tweets have been really nice and not offensive at all and everyone knows that's what really matters when it comes to being a great President. No one has anything to worry about

Do you have a newsletter? If you do I would like to subscribe to it!! LOL

[Kutcher55]

Stock markets have been tanking?

[egri]

If this tax increase does come to pass, I think we'll see a lot of money moved into municipal bonds. The extent that impacts collectibles, stocks, and everything else that has been overheated this past year is anyone's guess.

[honus94566]

Originally Posted by TobaccoKing4

Who cares Chris? The tweets have been really nice and not offensive at all and everyone knows that's what really matters when it comes to being a great President. No one has anything to worry about

I totally agree! It's nice to have someone that knows how to be a decent human and doesn't make our country the laughingstock of the world. As an added bonus, he also knows how to spell words.

[chriskim]

I guess most people here are long term investors. I am more of a short term investor who is heavily invest in tech stocks, with that said, I guess I could be the only one seeing my portfolio turned from green to red and staying red recently. My bad for calling the stock market is tanking. sorry...

[Exhibitman]

The OP question is based on two false premises. (1) gains on cards have always been taxable, and (2) cards are not subject to the same preferential 15%-20% capital gains rate as stocks. Collectibles are taxed at up to a 28% rate:

https://www.irs.gov/taxtopics/tc409

In some cases it may be more efficient to form a business and pay marginal income taxes on net profits than to take a capital gains approach to card sales. It all depends on each person's specific financial profile. One thing I am pretty certain of is that no one is moving money from tax-efficient investment like stocks held for more than a year to a less efficient one like cards if they are making decisions based on capital gains taxes. Money is going into hard assets like cards because of two factors: (1) a belief in short-term potential for flipping in and out at a profit that cannot be garnered in other investments, and (2) as a small piece of a portfolio to hedge against inflation, similar to how metals and other tangible assets have been treated in the past. As to the latter, with the high expenses to enter and exit the market, I think it is not a good investment relative to others. But they are fun to own; you can't beat looking the Bambino in the eyes.

[Yoda]

I believe the proposed new tax law aims to restore tax equity by making some hedge funds' income, now treated as capital gains as taxable income. I imagine the present treatment has cost the Treasury billions.

Should be some fireworks in Congress on this one.

[TobaccoKing4]

Originally Posted by chriskim

I guess most people here are long term investors. I am more of a short term investor who is heavily invest in tech stocks, with that said, I guess I could be the only one seeing my portfolio turned from green to red and staying red recently. My bad for calling the stock market is tanking. sorry...

You aren't the only one. Growth tech will be back once the inflation data settles down.

[Republicaninmass]

Originally Posted by TobaccoKing4

You aren't the only one. Growth tech will be back once the inflation data settles down.

Curious how this one ages.

I'm my OWN contrarian indicator

[TobaccoKing4]

Originally Posted by honus94566

I totally agree! It's nice to have someone that knows how to be a decent human and doesn't make our country the laughingstock of the world. As an added bonus, he also knows how to spell words.

100% man! Paying more for gas and some rando in Paris not being upset improves my life tenfold. Really looking forward to being able to leverage the joy and emotional comfort of the European populous into buying a house and supporting my family!

[egri]

Every thread needs a card.

[chriskim]

Originally Posted by egri

Every thread needs a card.

fixed

[Eric72]

Originally Posted by egri

Every thread needs a card.

Adam already posted a Ruth; however, I'll add this one.

Mugsy couldn't care less.

[Huysmans]

Originally Posted by TobaccoKing4

100% man! Paying more for gas and some rando in Paris not being upset improves my life tenfold. Really looking forward to being able to leverage the joy and emotional comfort of the European populous into buying a house and supporting my family!

Thanks for making my afternoon... this comment was spot on.

[rsdill2]

Originally Posted by chriskim

Stock markets has been tanking and investors are cashing out.

No comment on your main question. But I'm confused about this statement. Which stock market are you watching?

Rates of return for key US indices are attached below.

I can't see how you deduce that markets have been tanking.

[hcv123]

Originally Posted by rsdill2

No comment on your main question. But I'm confused about this statement. Which stock market are you watching?

Rates of return for key US indices are attached below.

I can't see how you deduce that markets have been tanking.

I have the same question. markets dropped a bit on the news yesterday, but a LOOOOONG way from "tanking"?

[packs]

I still don't understand where the POV that regular Joe's are selling Apple stock to buy cards comes from. No one is doing that.

[bigtrain]

I can’t get worked up over a proposal that would raise the capital gains rate
on those earning over $1,000,000.00 per year.

[Casey2296]

Originally Posted by bigtrain

I can’t get worked up over a proposal that would raise the capital gains rate
on those earning over $1,000,000.00 per year.

Here's a scenario where it would also apply.

Let's say an immigrant family came to NY 40 years ago with nothing, started a small business, say a restaurant, grocery, hardware store etc. spent their working lives not paying themselves a whole bunch, sacrificing days off, vacations, etc. raising a couple of kids who they want to leave a better life to than they had.

Now they're ready to retire. So they post their small business for sale and find a buyer that nets them just over a million dollars. Finally, a reward for 40 years of keeping your nose clean, working hard, being a part of your community, etc.

Some folks would call that the "American Dream".

With the proposed tax increase, which would put the rate at the highest in the world, and New York's current tax rate, that immigrant family would pay almost $600,000 to the State & Feds in taxes on that million dollar gain. Leaving them just over $400,000 for their retirement. Hardly the rich folks people love to hate.

The government also has a funny way of working that million dollar limit down over the years until it affects more and more people. Aka coming soon to a tax bracket near you.

[bobbyw8469]

Gotta pay for the green new something and all the cities being burned down some how. Tax away.

[jayshum]

Originally Posted by Casey2296

Here's a scenario where it would also apply.

Let's say an immigrant family came to NY 40 years ago with nothing, started a small business, say a restaurant, grocery, hardware store etc. spent their working lives not paying themselves a whole bunch, sacrificing days off, vacations, etc. raising a couple of kids who they want to leave a better life to than they had.

Now they're ready to retire. So they post their small business for sale and find a buyer that nets them just over a million dollars. Finally, a reward for 40 years of keeping your nose clean, working hard, being a part of your community, etc.

Some folks would call that the "American Dream".

With the proposed tax increase, which would put the rate at the highest in the world, and New York's current tax rate, that immigrant family would pay almost $600,000 to the State & Feds in taxes on that million dollar gain. Leaving them just over $400,000 for their retirement. Hardly the rich folks people love to hate.

The government also has a funny way of working that million dollar limit down over the years until it affects more and more people. Aka coming soon to a tax bracket near you.

The highest rate someone is taxed at does not apply to every dollar earned. It applies to the amount above a certain level. In this case, if capital gains are taxed at the same rate as a person's earnings, then the amount earned above $1 million would be taxed at around 40% while the amount below would be taxed at the lower rates used for the different tax brackets currently in effect so the amount they paid in taxes would be considerably less than the $600,000 you indicate. Also, it's not like they would be going from paying nothing in taxes to whatever the total amount they would pay under any new tax law is, but that seems to be what you are implying.

[BobC]

Originally Posted by Casey2296

Here's a scenario where it would also apply.

Let's say an immigrant family came to NY 40 years ago with nothing, started a small business, say a restaurant, grocery, hardware store etc. spent their working lives not paying themselves a whole bunch, sacrificing days off, vacations, etc. raising a couple of kids who they want to leave a better life to than they had.

Now they're ready to retire. So they post their small business for sale and find a buyer that nets them just over a million dollars. Finally, a reward for 40 years of keeping your nose clean, working hard, being a part of your community, etc.

Some folks would call that the "American Dream".

With the proposed tax increase, which would put the rate at the highest in the world, and New York's current tax rate, that immigrant family would pay almost $600,000 to the State & Feds in taxes on that million dollar gain. Leaving them just over $400,000 for their retirement. Hardly the rich folks people love to hate.

The government also has a funny way of working that million dollar limit down over the years until it affects more and more people. Aka coming soon to a tax bracket near you.

As an earlier poster, Jayshum, accurately pointed out, individuals are subject to graduated federal tax rates or tax brackets. You don't end up paying the highest possible rate on every single dollar of taxable income that you earn. At least not under current federal tax law, and I doubt such a new tax law allowing that to happen would ever be passed.

And for your specific example, I would hope that such an intelligent, hardworking, and successful business owning family would have paired up along the way with a good tax person who would assist them with such a sale. For if your currently incorrect position that the couple in your scenario would end up paying almost 60% of their total net taxable profit from the sale of their business in federal and state taxes should the proposed capital gains tax laws being discussed get enacted, and that resulting tax hit was largely due to the couple exceeding the $1MM taxable income threshold set by such a new tax law, a smart tax advisor would simply suggest they structure the payment(s) for the business sale so they don't receive all the sales proceeds in one single tax year. That way the transaction is afforded installment sales treatment and the resulting gain/profit can be spread over more than a single tax year. And by doing this you hopefully keep the couple from crossing the $1MM taxable income threshold that ends up triggering the more onerous tax rates the proposed law would put into effect. And it could have the added beneficial tax saving effect of allowing the couple to take advantage of the lower tax bracket rates for more than just a single year also.

Also, don't forget that federal income taxes are levied only on the NET profit/gain from the business being sold. I would assume that this couple may have some basis in inventory, fixtures, buildings, land, and other possible assets that they had acquired over the years in the operation of the business. They would also be receiving their basis in these assets as part of the sales proceeds from selling their business, and these dollars simply repaying them for their basis in those asssets are not taxed. So the end result should hopefully be more dollars in the couple's retirement pocket than the $400K+ amount you mentioned.

If you really want to be concerned about some of these proposed new tax laws, also pay attention to the idea they have about doing away with stepped-up basis when someone passes away. There is no specific income or dollar amount threshold being mentioned, nor any true idea of what this could end up being and who it could effect. For now though under current laws, when someone passes away their assets are inventoried, valued, and depending on the total value of all the assets , prior gifts, and possibly many other factors, the estate may be subject to and owe a federal estate tax on the decendent's assets. Meanwhile, the assets that are then left to the decedent's children or others (not including a surviving spouse) are generally given a stepped-up basis to their FMV (fair market value) at the time of the decedent's passing. So under current law, if you passed away and left your lifetime card collection to your children, their tax basis would most likely be the FMV of the collection on the day you passed. So assuming your kids consign the collection to an auction house for sale not long after your passing, it will most likely sell for close to that FMV, and probably results in little to no taxable gain to your kids, even if had acquired cards decades ago at signicantly less than what they are now worth today. So in a possible worst case scenario, if there is a new tax law enacted that does away with this basis step-up, in my example the tax basis of your collection now in your children's hands could be what you originally paid for everything. So now if they auction everything off, they could end up with significant gains that they would owe taxes on. And another potential issue is, how do your kids know what your original basis in the collection even is? Now for someone with a signicant collection, they are going to want to somehow document and support their tax basis in that collection so they don't make a problem for their heirs. Just something else to be aware of and to keep an eye on to see where it may go.

I do wish people would be a little more careful on the forum when tax questions are brought up as they may not know all the pertinent facts and circumstances when responding, thereby possibly giving some people reading such threads a wrong or innaccurate idea or answer. There are often exceptions and special rules/conditions that impact or vary the answer of a particular tax question. And in the case of discussions involving potential new or proposed tax laws, take everything with a big grain of salt until something is actually passed and signed into law.

[gawaintheknight]

+1

Originally Posted by bigtrain

I can’t get worked up over a proposal that would raise the capital gains rate
on those earning over $1,000,000.00 per year.

[nolemmings]

I've stumbled upon a way to ignore the capital gains tax and my system has remained tried and true, mastered to the point that it's automatic. I just sell everything at a loss.

It's either idiot proof or proof that I'm an idiot--I'm not sure.

[samosa4u]

Originally Posted by chriskim

Stock markets has been tanking and investors are cashing out.

Yeah, I know, and I bought a PSA 6 Leaf Jackie Robinson last night for $1,500.