IRS tax question

[Rhotchkiss]

Please clarify what you mean by the “New Tax Laws of 2018”. Do you mean the Supreme Court ruling about the application of State Sales Tax on internet sales? Because if so, and I assume that’s what you are talking about, a court ruling about the application of state sales taxes has ZERO to do with how taxable gains are determined for Federal Income tax purposes.

Regarding sales tax, the tax is due on the gross sales price, apparently including shipping costs.

Regarding federal taxes, you only pay taxes on your gain (gross price minus basis and all costs). Thus, your example is flat out incorrect for federal tax purposes.

[ullmandds]

Originally Posted by Rhotchkiss

Please clarify what you mean by the “New Tax Laws of 2018”. Do you mean the Supreme Court ruling about the application of State Sales Tax on internet sales? Because if so, and I assume that’s what you are talking about, a court ruling about the application of state sales taxes has ZERO to do with how taxable gains are determined for Federal Income tax purposes.

Regarding sales tax, the tax is due on the gross sales price, apparently including shipping costs.

Regarding federal taxes, you only pay taxes on your gain (gross price minus basis and all costs). Thus, your example is flat out incorrect for federal tax purposes.

+1

[sb1]

As a collectible with a max tax rate of 28% you have never been allowed to deduct any related expenses(bank box, insurance, travel, etc) only the actual cost of the item.

[ullmandds]

Originally Posted by sb1

As a collectible with a max tax rate of 28% you have never been allowed to deduct any related expenses(bank box, insurance, travel, etc) only the actual cost of the item.

i thought you could deduct costs related to the sale? like AH fees?

[Rhotchkiss]

Right. There are no ordinary or necessary business expenses associated with a collectible, but like stock etc, you can add any transaction fees you incur on acquisition and disposition to your basis.

I buy a card for $1000 with BP and then pay another $100 in taxes, shipping, etc. my basis is $1100, and if I sold it immediately for $1100, I would have no gain.

Three years later I sell the card for $1700. My taxable gain is $600 ($1700 - $1100 basis). If there are costs associated with the sale, then those reduce my gain. Let’s say I sell the card for $1700 on ebay, but eBay and PayPal take 10%, or $1700, then my net amount realized is $1,530. You subtract the $1100 basis and my taxable gain is $430.

Scott is correct that you normally do not deduct or capitalize costs associated with owning the card (storage, insurance, etc); although from a tax perspective, I don’t see what you shouldn’t be able to capitalize these costs to the basis of the card.

BTW- To quality my comments, I have a masters is tax law from Georgetown and practiced tax (and real estate) law for 7 years before I gave that up in 2006.

[GeoPoto]

I think there is an annual # of transactions threshold that triggers responsibility on the auctioneer's part to issue you a document with a copy to IRS showing your gross receipts. eBay does this. It is like a broker/custodian reporting gross financial asset sales. The presumption is that you can "explain" the tax consequences by citing a cost basis to compute a gain or loss from the gross receipts.

[ruth-gehrig]

Someone pass the bottle of Excedrin Migraine please