Reporting sales of large $$ items

[conor912]

Originally Posted by darkhorse9

Not looking to delve into any political debates (please) but there currently is a proposal to make "Unrealized capital gains" taxable. That basically means that if you bought a card 20 years ago for $100 and it's current value is $5,000, you would be taxed on the $4,900 worth of value your item has today even if you don't sell it. You would be taxed just for having it.

This is for informational purposes only...not for political debate.

Interesting. Can you post a source?

[Papergoy]

The unrealized gain is only currently being debated (if it's even getting any traction) on billionaires as I recall. AT THIS TIME it would not apply to average folk- only saying AT THIS TIME as often once a tax is established...

I run a business, and thus if I sold cards they would go through my schedule C. Of course I'd be liable for both halves of the FICA etc. But if I remember my rules correctly, for anyone not running a business, the gain is reported as a capital gain (just google capital gains on collectibles to read for yourself).

And I am certain everyone pays all taxes due.

[JustinD]

Why is no one discussing capital losses to offset on these taxes? How often do we read of those posts the discuss a loss.

If we are cuffed into these nonsensical taxes on used goods we should be using the opposite to offset. This is commonplace in gambling and investments.

[BobC]

Originally Posted by JustinD

Why is no one discussing capital losses to offset on these taxes? How often do we read of those posts the discuss a loss.

If we are cuffed into these nonsensical taxes on used goods we should be using the opposite to offset. This is commonplace in gambling and investments.

I have written about losses on various other threads on this forum already. But first off, why do you refer to such taxes as "nonsensical", can you explain what you mean by that?

Secondly, most tax discussions are not simple yes or no answers, so trying to give an accurate, general response can take up a lot of space. Also, you have three distinct types of card sale transactions that can occur depending on if the seller is a Dealer, Collector/Hobbyist, or an Investor, with the taxable outcome from a sale potentially (and probably) differing between all three types. And I would argue that any one of us selling cards can potentially be all three types of sellers at the exact same time, just to make things even more interesting and clear.

So do you maybe have a more specific question(s) you wanted to ask that won't take a novel to answer?

[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.

[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

[dacubfan]

How many of us actually have documentation proof of what we paid for even some of the items in our collection? Therefore taxes will be due on the entire sale amount. I had planned to liquidate much of my collection while alive but am now rethinking that idea due to the tax implications. Instead upon my death my sons will receive a stepped up basis when they sell with little tax due unless they hold the items for another 20 years. Any thoughts on this approach? I've heard rumors of the stepped up basis being eliminated. Wouldn't doubt it.

[Angyale]

Where someone paid $100 for an item, the owner can only sell it for $500 due to market conditions at the time is sale but the “book value” is $1000 so the seller can claim a capital loss? You can’t have one scenario without the other. So if there is an unrealized capital gain, couldn’t there be an unrealized capital loss as well?

Angyale

[RL]

do not try to cheat the IRS. they will get you.

[conor912]

It makes more sense as an ownership tax than an unrealized capital gain tax….like taxes on real estate. You pay them every year even if you own the property outright. If it’s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

[darkhorse9]

Originally Posted by conor912

It makes more sense as an ownership tax than an unrealized capital gain tax….like taxes on real estate. You pay them every year even if you own the property outright. If it’s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

Property taxes go up (or down) depending on what they are paid for. Things like schools, roads, sanitation. etc. The property owner gets value in return.

ownership tax would just be a general fund collection with no return value to the owner. Same with the unrealized capital gains tax

[BobC]

Originally Posted by darkhorse9

Property taxes go up (or down) depending on what they are paid for. Things like schools, roads, sanitation. etc. The property owner gets value in return.

ownership tax would just be a general fund collection with no return value to the owner. Same with the unrealized capital gains tax

For federal purposes it would likely go into the general tax revenue fund, which supposedly benefits all of us.

[BobC]

Originally Posted by conor912

It makes more sense as an ownership tax than an unrealized capital gain tax….like taxes on real estate. You pay them every year even if you own the property outright. If it’s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

Which is a big part of the reason they may likely not do it.

[philliesfan]

After reading all of this mumble jumble I don't understand.......I think I will just give everything away........UGH!
Bob

[BobC]

Originally Posted by Angyale

Where someone paid $100 for an item, the owner can only sell it for $500 due to market conditions at the time is sale but the “book value” is $1000 so the seller can claim a capital loss? You can’t have one scenario without the other. So if there is an unrealized capital gain, couldn’t there be an unrealized capital loss as well?

Angyale

That is another possible problem if the government were to pass a new "Mark to Market" tax law on some individual's and their investments/assets. Say you are subject to this tax law and buy something for $100 during the year. At the end of the year the item's value has jumped to $1,000, so you now have to report and pay the tax on your $900 gain. So you go to sell the asset to cover the tax due, but find out that since the prior year-end the value dropped down to $500, and you sell it for that. You still have to pay the tax on the prior year's $900 gain, but because of the sale, you've now created a $500 loss to report, but you have to wait to do that on next year's tax return. Ugh!

[BobC]

Originally Posted by dacubfan

How many of us actually have documentation proof of what we paid for even some of the items in our collection? Therefore taxes will be due on the entire sale amount. I had planned to liquidate much of my collection while alive but am now rethinking that idea due to the tax implications. Instead upon my death my sons will receive a stepped up basis when they sell with little tax due unless they hold the items for another 20 years. Any thoughts on this approach? I've heard rumors of the stepped up basis being eliminated. Wouldn't doubt it.

Just because you may have to estimate things like basis of your cards doesn't mean you can't. Believe it or not, IRS agents are also people and can be reasonable and work with you. They are not like they often get reflected as in movies and on TV.

However, the idea of waiting till someone passes away so they can leave their card collection to whomever they wish, at a Stepped-Up tax basis equal to the FMV of the collection at the time of their passing, is a perfectly good and viable way to save on income taxes when/if the collection is sold, at least as the law currently stands.

You are also correct that there has been talk and rumors of possibly doing away with this Basis Step-Up provision under the current federal estate tax laws, but nothing has been passed into law yet, I'm not so sure that will happen either. The government wants money now, right? Well, by inclusion of a card collection in someone's estate, the then FMV of the collection becomes subject to federal estate taxes. Now you've already got a large chunk of the population screaming about how federal estate taxes are an unfair money grab by our government, and are tantamount to unfair double-taxation on the value of property and assets that the deceased person worked hard for over their entire life, and bought/paid for with money that had already been taxed (hence the double-taxation factor). So once the FMV value of the deceased's card collection has been subjected to the federal estate tax, whether any federal estate tax ended up being due on it or not, they Step-Up the basis of the collection to the FMV used for the estate tax calculation so they now don't potentially subject the card collection to triple-taxation when whoever inherited the collection sells it for more than what was originally paid for it (tax basis) by the deceased. The one thing I hadn't mentioned yet is that everyone also gets a federal estate tax exemption, kind of like the standard deduction everyone gets that they can take each year on their income tax return. The federal estate tax exemption just got bumped up to $12.06M per person, beginning in 2022. That means that normally when someone passes away in 2022, the first $12.06M of their estate value has $0 federal estate tax on it.

Now remember my saying how the government is always looking for more tax money? Well if the person in my example passes away in 2022 and their total estate at the time, including the card collection, is worth less than $12.06M, they pay no estate tax on the value of the collection. And then, whether they Stepped-Up the tax basis of the card collection or not, if the person who inherited the collection decides to keep and not sell it, the government has no sale to tax and gets diddly-squat. The easiest thing for the government to do to possibly speed up their tax collections then is to simply reduce the federal estate tax exemption they give everybody. Remember when Hillary ran against Trump, she talked about dropping the exemption all the way back to just $1M per person. By lowering the federal estate tax exemption enough in my example, the card collection could end up becoming subject to the federal estate tax after all, and the decedent's estate ends up paying the estate tax owed on that collection's value right now. So by dropping the federal estate tax exemption, the the government gets it tax money now, without having to pass laws to stop the Basis Step-Up of inherited property and getting accused of now trying to triple-tax it, and they don't have to wait for the heir to sell it. So that is my best guess, currently, as to what the government may/will do.

[BobC]

Originally Posted by conor912

Interesting. Can you post a source?

Just Google and look for "proposed taxes on appreciated assets/investments/stocks", or even "Biden proposed taxes", and you should get lots of threads talking about the speculated changes the current administration may yet propose and try to pass as new tax legislation.

And the specific thing you're asking about in regards to possibly making people pay taxes on investments they own, but haven't acually sold, has a name to it, and is in fact already enforced on certain specific business taxpayers. It is called "Mark to Market". The idea is to impose this "Mark to Market" strategy on very well-off taxpayers by setting some as of yet undecided upon minimum threshold measure. Then when a taxpayer exceeds that threshold, they'll have to look at all their investment/stock holdings at the end of the tax year and see what their then current FMV is as of the year-end date. They would then compare that year-end FMV to what they actually paid (tax basis) for their investments, and to the extent the year-end FMV exceeded their tax basis, report that increase as taxable income on their return and pay the appropriate taxes on the appreciated (or unrealized) gain, as whatever they end up deciding those taxes (and the rates for them) are to be.

Nothing has been finalized in regards to this proposed idea yet, and none of it will matter if this isn't enacted into law. But, I wouldn't be surprised if it doesn't pass into law because while it would tax very wealthy people like Jeff Bezos when his Amazon stock goes up, by now taxing his unsold shares, that will reset Bezos' tax basis in those Amazon shares to the FMV they were taxed on. So then in the following year if the Amazon shares go down in value, Bezos could now in all likelihood claim a loss and possibly be due a big tax refund. Can already hear the masses screaming about how this is really just another tax loophole for the rich then.

And if this did somehow pass, I don't think anyone need worry about having to pay such taxes on their card collection. I would imagine the government would restrict any such "Mark to Market" taxes to only those investments/assets that have an easily discernible and universally accepted method in determing their year-end FMVs, like public traded stocks. The idea of otherwise having people be forced to get annual appraisals of their non-conventional assets/investments is sheer insanity.

[Johnny630]

Now is the Perfect Time To Sell

[Peter_Spaeth]

Originally Posted by BobC

Just Google and look for "proposed taxes on appreciated assets/investments/stocks", or even "Biden proposed taxes", and you should get lots of threads talking about the speculated changes the current administration may yet propose and try to pass as new tax legislation.

And the specific thing you're asking about in regards to possibly making people pay taxes on investments they own, but haven't acually sold, has a name to it, and is in fact already enforced on certain specific business taxpayers. It is called "Mark to Market". The idea is to impose this "Mark to Market" strategy on very well-off taxpayers by setting some as of yet undecided upon minimum threshold measure. Then when a taxpayer exceeds that threshold, they'll have to look at all their investment/stock holdings at the end of the tax year and see what their then current FMV is as of the year-end date. They would then compare that year-end FMV to what they actually paid (tax basis) for their investments, and to the extent the year-end FMV exceeded their tax basis, report that increase as taxable income on their return and pay the appropriate taxes on the appreciated (or unrealized) gain, as whatever they end up deciding those taxes (and the rates for them) are to be.

Nothing has been finalized in regards to this proposed idea yet, and none of it will matter if this isn't enacted into law. But, I wouldn't be surprised if it doesn't pass into law because while it would tax very wealthy people like Jeff Bezos when his Amazon stock goes up, by now taxing his unsold shares, that will reset Bezos' tax basis in those Amazon shares to the FMV they were taxed on. So then in the following year if the Amazon shares go down in value, Bezos could now in all likelihood claim a loss and possibly be due a big tax refund. Can already hear the masses screaming about how this is really just another tax loophole for the rich then.

And if this did somehow pass, I don't think anyone need worry about having to pay such taxes on their card collection. I would imagine the government would restrict any such "Mark to Market" taxes to only those investments/assets that have an easily discernible and universally accepted method in determing their year-end FMVs, like public traded stocks. The idea of otherwise having people be forced to get annual appraisals of their non-conventional assets/investments is sheer insanity.

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

[BobC]

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.

Good lord Peter, don't go giving anyone any more ideas! LOL

[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?

[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!

[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

[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.

[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.

[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.