Reporting sales of large $$ items

[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

[ajjohnsonsoxfan]

Originally Posted by 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

Don't know if you read all the way down to the end of your linked article...

"Even though most millionaires would receive a tax cut, people with seven-figure incomes — on average — would see their tax bills climb by $68,000, TPC estimates. That’s because one-third of millionaires would face tax increases averaging $228,000.

Aside from easing the SALT cap, Democrats are also proposing new surcharges on the very rich, with those earning more than $10 million facing a new 5 percent surtax. People making more than $25 million would pay another 3 percent on top of that.

So people above those income thresholds would typically pay more under Democrats' plan, even as they benefit from a higher SALT cap, while those making more than $1 million but not enough to face those surcharges would owe less."


Corporations and very wealthy individuals have far too many loopholes to forgo paying any taxes. Seems to me it's about time we ask them to start paying a fair share (especially on sales of their baseball cards). :-)