PWCC - Sorry, Yet Again

[bnorth]

Originally Posted by BobC

I find it hard to believe they would/could do that, as it would definitely turn some people off from ever consigning with them. The wording they used definitely leaves something to be desired. But I can also understand them saying they won't simply return the cards because they don't want to go through the work and shipping expense of doing so.

I do not know their consignment policy and if they have any pre-acceptance protocols in place so they don't receive tons of unsolicited consignment submissions that aren't even worth their minimum bid. Unsold lots are not a good look for any AH/seller, and typically incur costs they can't recoup since there was no sale. And the fact that they had approximately 3,000 or so lots that didn't even warrant a bid in their first ever independent platform auction is a bit shocking to me. That seems like an awful high percentage of their initial auction lots got no bids, between 5% - 10%. Makes you wonder if they just did a bad job in accepting items for consignment they shouldn't have, if a lot of people that normally saw and bid on their auctions when they were on Ebay just aren't there now, at least for this first auction, or if there are even other unknown factors causing/influencing this large number of lots to not sell. Probably a combination of factors, that could change as they move forward with future auctions. We'll likely never know for certain though.

Still, if they had 3,000+ lots that didn't even get a $10 minimum bid, and say the average value for those unsold lots was realistically $5 each, that would mean that if their policy of taking possession of anything that didn't sell in their auction was really true that they just grabbed about $15K of cards for nothing. I don't think that will go over well at all with a lot of people, and would add more negative publicity to their name, which is probably the last thing they need right now.

I get what you are saying, I just see it way differently.

Lets go with your $5 value because it seems reasonable. Wouldn't PWCC charge more than that for fees and return postage of the unsold item? To me it seems like a win win for both parties. It also really pains me to say PWCC is doing anything correctly.

[BobC]

Originally Posted by bnorth

I get what you are saying, I just see it way differently.

Lets go with your $5 value because it seems reasonable. Wouldn't PWCC charge more than that for fees and return postage of the unsold item? To me it seems like a win win for both parties. It also really pains me to say PWCC is doing anything correctly.

Hey Ben,

This whole thing seems goofy, and IMO doesn't ultimately look good for PWCC no matter how you slice it if they can, and do, in fact just take someone's cards. I've never heard of any AH or seller in the hobby doing anything like this......ever! If you or anyone else is aware of this type of policy being currently, or at anytime in the past, practiced by anyone else in our hobby, I'ld love to hear about it, and who else it was doing it.

I get exactly what you're saying though, but would all the people that consigned, and then lost their cards, also agree? I don't think they all would. Plus, I went back and edited and added some more to my original post you quoted. Go back and see what else I added while you were responding. I can see this practice, if in fact it is what they are doing, creating more negative publicity for them that they don't need.

If nothing else, it also opens them up to potential accusations of giving false valuation estimates by accepting potential consignments from people who expect to sell their cards to make money, not just end up giving them to PWCC.

What I would suggest is that someone contact PWCC one more time for defintive clarification of exactly what they mean by "forfeited". I would follow-up that response from Heather Harrison by asking if that means if a card of mine that PWCC accepted for consignment and sale did not get even a minimum bid in their auction, and therefore didn't sell, that they (PWCC) took full and complete possession and ownership of my card, without any compensation at all to me from PWCC, whatsoever, and that if PWCC subsequently did sell my card in the future, as the immediately subsequent current owner of that card, they kept all the proceeds and I had the right to absolutely nothing ($0) from the sale of my card. And I would likely also include/ask Heather Harrison if upon their taking possession and ownership of my card for nothing, if that is what they are going to do, would they (PWCC) agree that I can then claim my full basis (cost I have in acquiring the card) as a potential loss on my next tax return that I will be submitting to the IRS. That would be just to let them know this transaction/activity of theirs could potentially have some tax and IRS compliance reporting consequences for myself, and possibly them as well, under the remote possibility they hadn't thought/known about that already.

I have not, nor do I ever intend to consign and sell anything with PWCC so, I'll leave the sending of such a follow-up, clarifying email to PWCC to others.

[Peter_Spaeth]

Sounds to me, Bob, like Heather has spoken. Do you REALLY think she's going to give the dude tax advice?

[BobC]

Originally Posted by Peter_Spaeth

Sounds to me, Bob, like Heather has spoken. Do you REALLY think she's going to give the dude tax advice?

No I would not expect her to give tax advice, just confirm that someone in effect gave them something for nothing, and that they did not have any obligation to then give them any future compensation whatsoever for it, ever. Which means that the person should then be able to claim on their subsequent tax return that they effectively sold their card for nothing. Do you agree the party forfeiting the card did not just not just gift it to PWCC?

And assuming this wasn't a gift, in PWCC's case I'm not sure if the IRS wouldn't view this sudden acquisition of these card as taxable income to them, at least equal to the alleged FMV of the card or the fees they didn't collect in trying to sell it. Best case scenario for PWCC would be they are considered to have $0 basis in the card and only pay tax on the net income/gain when it is sold.

Regardless, I don't think this practice of theirs is widely known in the hobby (I know I had no idea about it), at least not yet. I can also see that as info on how they operate like this starts to get out there that it could turn even more people against using them.

[Peter_Spaeth]

Originally Posted by BobC

No I would not expect her to give tax advice, just confirm that someone in effect gave them something for nothing, and that they did not have any obligation to then give them any future compensation whatsoever for it, ever. Which means that the person should then be able to claim on their subsequent tax return that they effectively sold their card for nothing. Do you agree the party forfeiting the card did not just not just gift it to PWCC?

And assuming this wasn't a gift, in PWCC's case I'm not sure if the IRS wouldn't view this sudden acquisition of these card as taxable income to them, at least equal to the alleged FMV of the card or the fees they didn't collect in trying to sell it. Best case scenario for PWCC would be they are considered to have $0 basis in the card and only pay tax on the net income/gain when it is sold.

Regardless, I don't think this practice of theirs is widely known in the hobby (I know I had no idea about it), at least not yet. I can also see that as info on how they operate like this starts to get out there that it could turn even more people against using them.

It doesn't seem to be a gift, I agree. But is there a difference between a gift and a contractual transfer for no value, I don't know.

Anyhow, despite what the all too predictable defender says it seems to me a shitty thing to do, to reward yourself because you failed to sell someone's card for them. Hey dude, I couldn't sell your card so I'm just gonna keep it. To me that's a WTF. Even if it is "absolute junk."

Of course that characterization assumes all that matters is dollar value. Explains much.

[BobC]

Originally Posted by Peter_Spaeth

It doesn't seem to be a gift, I agree. But is there a difference between a gift and a contractual transfer for no value, I don't know.

Anyhow, despite what the all too predictable defender says it seems to me a shitty thing to do, to reward yourself because you failed to sell someone's card for them. Hey dude, I couldn't sell your card so I'm just gonna keep it. To me that's a WTF. Even if it is "absolute junk."

Of course that characterization assumes all that matters is dollar value. Explains much.

Peter,

I'm with you. Why don't they just turn the item away as a consignment and simply tell the owner they don't think it will sell for their required minimum. Or here's a novel idea I already mentioned in an earlier post, why don't they tell the owner we'll sell it, but only if you let us combine it with another card(s) in the same lot so we pretty much know it will get the minimum bid, because we don't want to just take your card(s) for nothing.

We all know the old cliche' about how most people always think/feel that something they own is worth more than it actually is. Now if PWCC advised consignors about combining cards in lots to better the chances the lot would at least sell for the minimum, and they declined because they thought their card(s) would sell for more, then I don't think anyone would have as much of an issue with PWCC taking the card(s) by forfeiture.

Now as to your question of a gift versus a transfer for no supposed value, I believe there is a difference. A gift however is usually from one person to another, not from one person to an entirely unrelated for-profit business. So I apologize for my probable innaccurate use of that term in this case, and am pretty confident this could not be construed as a gift. Now as far as the transfer for no value, I know with your background that you are well aware that a transaction/contract/agreement cannot be considered valid and enforceable without both sides having given something of value to complete their part of such an agreement. And for the benefit of others reading this that have no clue what Peter and I are talking about, that is why when you look at some agreements or contracts they will often say something like "For the sum of $10 and.......". This is because there has to be some recognized value or compensation given by both parties/sides to the other for such a contract or agreement to be legallly recognized and enforceable. Doesn't mean the compensation has to be fair and equitable, just that both sides gave something for it to be legal and enforceable.

In this case, the person forfeiting their card is clearly giving up their card, so they would have satisfied their side of the agreement. But what did PWCC give up as compensation for their side of this agreement, and for the forfeiture of this card to be legally enforceable? Even though the seller got nothing paid to them directly for the unsuccessful sale of their card, I'm assuming that it is somehow implied (or maybe even explicitly written and spelled out) in PWCC's consignment agreement that they are owed a commission/fee for their work in listing and selling every item in one of their auctions, even those that receive no bids and aren't sold. And I'm further assuming that in the case of those items that don't get a bid and sell, the consignment agreement somehow states the card(s) that didn't sell are simply taken over by (forfeited to) PWCC to satisy their commissions/fees in lieu of them actually billing the unsuccessful consignor on their cards that didn't sell, and having the consignor then pay those commissions/fees to PWCC, or deduct them from the net proceeds of other cards the consignor may have sold in the same auction.

As already stated above, I've never consigned or sold anything with PWCC so, these are only assumptions on my part as to what they are actually doing, and maybe why. I also don't know if PWCC has stated anywhere in their agreements and paperwork if they have a defined mininum commission/fee they charge for trying to sell an item for someone. If so, would be nice to learn what it is.

Now in an earlier post I also mentioned about some possible tax consequences from this card forfeiture provision. From the standpoint of the consignor/seller, their card is gone and technically sold for I'm assuming whatever their commission/fee was. But since the commission/fee being paid is also a deductible transaction/sales cost to them, they effectively sold it for $0, and depending on other factors, would still technically have a loss equal to their tax basis in the card. Whether they can actually deduct such a loss on their tax return though is then dependent on each individual seller's facts and circumstances.

As for PWCC, I don't know how they record these forfeiture transactions on their books, or how they then subsequently treat them for tax purposes. I believe the correct way to record and report these forfeiture transactions would be to record them as commission/fee income on their books, equal to either the FMV of the forfeited card(s) or their defined minimum commission/fee, whichever is greater. Then the forfeited card(s) would be included as part of their own card inventory, with a cost basis of whatever they recorded as a commission/fee for the card(s). So when they went to finally sell the card(s), they would report 100% of the sales price as part of their ordinary gross taxable sales income, net of any applicable and allowable operating, carrying, sales, or transaction costs incurred. The important thing here I believe is that they initially are reporting the FMV (or at least the minimum defined commission/fee amount) of the card(s) received via forfeitures as ordinary taxable income on their books. By doing so they recognize and record the compensation they were to give on their side of the original assignment agreement, and thereby make the forfeiture transaction legal and enforceable.

If, for whatever reason, PWCC chose not to immediately recognize commission/fee income when they acquired a card(s) through forfeiture because no actual cash changed hands at the time, they could instead just retain and record the card(s) as part of their inventory, but with a $0 cost basis. And then whenever they sold the card(s), they would still pick up all the sales proceeds as gross ordinary taxable income. The advantage could be the deferral of taxable income by not picking up the commission/fee income immediately when the card(s) was originally forfeited, but finally picking up the income and reporting it maybe not till years later when the card(s) is actually sold.

The thing is, I don't believe the IRS would agree with the idea of deferring all the income from forfeited cards to a possibly much later year of sale. And by not reporting anything on their books income-wise when they originally took possession of the card(s) by forfeiture, I think a good attorney could then argue that by their own actions, PWCC was effectively saying they didn't give anything of value to someone who ended up forfeiting a card to them, and therefore render the consignment agreement effectively null and unenforceable. Would at least be interesting to hear and watch that fight.

[Peter_Spaeth]

Bob one might look at the forfeiture provision as just one term of an overall contract for which there clearly was consideration on PWCC's part, including PWCC's effort to sell the card. Not sure you would isolate it in asking is it enforceable.

To me it's more an ethical than legal issue and I leave the tax to you. As for less draconian solutions, how about just doing what Scott does, mail the card back? The cost of a few mailers and postage isn't going to break PWCC's bank.

[bnorth]

Originally Posted by BobC

No I would not expect her to give tax advice, just confirm that someone in effect gave them something for nothing, and that they did not have any obligation to then give them any future compensation whatsoever for it, ever. Which means that the person should then be able to claim on their subsequent tax return that they effectively sold their card for nothing. Do you agree the party forfeiting the card did not just not just gift it to PWCC?

And assuming this wasn't a gift, in PWCC's case I'm not sure if the IRS wouldn't view this sudden acquisition of these card as taxable income to them, at least equal to the alleged FMV of the card or the fees they didn't collect in trying to sell it. Best case scenario for PWCC would be they are considered to have $0 basis in the card and only pay tax on the net income/gain when it is sold.

Regardless, I don't think this practice of theirs is widely known in the hobby (I know I had no idea about it), at least not yet. I can also see that as info on how they operate like this starts to get out there that it could turn even more people against using them.

To the part I made bold. This is your second post with this. Please by any stretch of the imagination tell us how PWCC would be getting anything for free. In most if not all cases wouldn't they really be saving the consignor money? Unless you know something I don't. Did every aspect of running PWCC as a business become free because someones card didn't sell for $10?

[BobC]

Originally Posted by bnorth

To the part I made bold. This is your second post with this. Please by any stretch of the imagination tell us how PWCC would be getting anything for free. In most if not all cases wouldn't they really be saving the consignor money? Unless you know something I don't. Did every aspect of running PWCC as a business become free because someones card didn't sell for $10?

My apologies, I did not state that very well, and was more or less simply referring to the fact that the consignor didn't give anything to the seller, and vice versa in this scenario, other than a forfeited card. In my defense though, I did say "in effect" they got something for nothing, and didn't mean it in a simple, literal way, as you probably are taking it. I was thinking of this more from the consignor's side, as I did a little more expanded explaining in post #122, and mentioned how if the consignor was deemed to get hit with a commission/fee for having the card listed, then this was exactly the same amount they'd have to report as having technically sold the card for. And since the implied commission/fee and sales price are going to be exactly equal and offset one another, the consignor effectively got absolutely nothing for the card. And since the seller ends up with the card and the consignor nothing, I feel it's pretty safe to think that the consignor will feel the seller, in effect, got their card for nothing. And that was the context I was saying that under.

Consignors select and go to sellers to aid and assist them in selling their items for as much money as possible. When someone doesn't advise you properly to help you sell your items, even for a minimum set by the seller and not the consignor, and you simply end up handing your card over to the seller, how do think those consignors are going to feel?

Also, I do recognize that there could have been (and probably should be) some implied commission/fee owed to the seller. But to the extent that any forfeited card was worth more than some stated minimum commission/fee, then yes, the seller did get something for nothing, the excess value of the card over the supposed minimum commission/fee. Think of this, let's say you had two cards consigned in some seller's auction, and both were pretty much agreed upon by the hobby community to be worth $10 each. And one of them sold for exactly $10, while the other one didn't get a bid, for whatever reason, so the seller just took and kept it as theirs. Now I don't know what a normal seller's exact commission/fee would be on a $10 sale, but I'm going to go out on a limb and speculate that you got money coming back to you on the $10 card sale, net of the seller's commissions/fees. So why would this seller get to effectively say that a card that is supposedly worth less than $10, because no one bid on it in that particular auction, should have a higher implied commission/fee than a card that did sell for $10? If that isn't tantamount to the seller getting something for nothing, what is? And yes, I know you're going to tell me the consignor signed and agreed to the seller's terms so it is on them. But in looking at it in my specific example, doesn't it seem extremely unfair to the consignor in this case?

Or how about a consignor who supposedly had a PSA7 1953 Topps common card in an auction that no one bid on? I know it is only a common, but what would you have to pay today just to get PSA to grade that same card, forgetting about the actual value of the card itself? I think pretty much everyone on Net54 would agree that card is worth at least $10. Now how pissed do you think the owner of that card would be at the thought of some seller just taking it. And even if someone else then speculated that a seller likely wouldn't take that card from the consignor as a forfeiture in that particular instance, then they probably shouldn't take anyone's card ever, and at least be consistent in their treatment of all consignors. Has anyone here on Net54 ever actually lost a card to a seller through such a forfeiture provision? If so, would be curious to know how they were treated and if they were offered any other options than forfeiting their card.

However, as I've also mentioned, I've never consigned anything to any AH or online seller and have never actually seen one of these consignment agreements, especially ones with forfeiture clauses, and am just asking questions myself. So I don't know if any one would actually spell out and define a minimum commission/fee to be charged someone in their consignment agreements, or if they would explicitly refer to the forfeiture of unsold cards as payment for such commissions/fees, or not. And absent such specific language in such agreements, that is all one can do is speculate what they actually meant/intended.

And as I explained in post #122, knowing how a seller may internally account for these forfeitures would really help to answer whether they themselves feel they paid anything for these forfeited cards or not. But that is something we'll likely never be able to find out for any seller.