Selling a card you inherited - Income tax

[Directly]

I assume this discussion is referring to only one card, what about 50 cards --- does each card need to be listed and valued separately in the will or can we show a lump sum of value?--50 cards valued at $$$$.

[swarmee]

Originally Posted by Directly

I assume this discussion is referring to only one card, what about 50 cards --- does each card need to be listed and valued separately in the will or can we show a lump sum of value?--50 cards valued at $$$$.

Are you going to sell all 50 cards in one lot or one calendar year? Or are you going to sell them over multiple years as individual cards? You are best getting new FMV's for all cards, IMO.

[BobC]

Originally Posted by Directly

I assume this discussion is referring to only one card, what about 50 cards --- does each card need to be listed and valued separately in the will or can we show a lump sum of value?--50 cards valued at $$$$.

Great question Tom. I've only been using a single card in my scenarios and examples to keep things simple and easier to explain. But you're absolutely right, if there are multiple cards, then you are technically supposed to figure out and keep track of the tax basis of each separate card. That way, if you break out and only sell one, or even just a few, of the cards inherited, you can properly list the tax basis when you report their sales.

Just to be technically correct, the value of the cards would most likely not be shown in the will, nor would I expect them to be specifically listed, unless the inheritance was of a rather small collection of really significant cards, like say a T206 Wagner or '52 Topps Mantle maybe. A person's will can be written at any time, many years before they pass on. And the values of particular items, say in someone's card collection, can obviously change over time, along with the actual cards in that collection as well. No one is going to keep going back and be constantly re-writing and amending their will (and paying their attorney to do so) just to update the value of their card collection, or likely the list of all the specific cards in it. At least no sane person I've ever met or heard of. LOL

Having said that, if the will just says I leave my card collection to my son/daughter, that is it, there is no listed value or inventory. In that case, it is really up to the executor/fiduciary in charge of the decedent's estate to inventory and take control of all the decedent's assets and debts, determine the value of all those items for potential estate tax purposes, and to then see to it that the terms of the will are carried out to the extent legal and possible, in accordance with the laws of the state the estate is in. Chances often are that one of the beneficiaries may also be the executor/fiduciary, or not. Regardless, I normally wouldn't expect the executor/fiduciary to even try and determine specific values for every single card in larger collections. This is where if it's your collection, it can really help your family out to have an inventory or some kind of listing of what all is in it to assist in the valuation that may be needed for your estate's purposes after you pass. Or alternatively, in determining the values to be used for coming up with the "stepped-up" tax basis of the cards for your heirs. Most likely though, if someone's net taxable estate value in total is going to be nowhere near the amount that would require any federal estate tax return be filed, or estate tax paid, the executor/fiduciary will likely not waste much time or energy in seeking appraisals and such, and will just do whatever the probate court overseeing the estate minimally requires of them. In all honesty, if the will doesn't even mention a card collection, or if there isn't a will at all, I wouldn't be surprised if the collection just suddenly turns up in the possession of a son(s)/daughter(s), with no one telling the probate court anything about it at all.

So unless in the extreme rare occasion that an executor/fiduciary would get specific inherited cards appraised and valued, it will most likely be up to whomever actually inherits the cards to figure out (and if needed estimate as best they can) the then current FMV of the cards they just inherited. And in the case of something like say a set, or partial set, where they maybe come up with an overall valuation for the entire set/lot, when they go to sell it, maybe back out the superstar/HOFer cards and separately value them, and then just take the remaining balance of the overall appraised value of the set/lot, and average it out over how many cards are left.

In other words, say you have some set/lot of 50 cards you inherited, probably worth about $2,000 according to some pricing guides, dealers, etc. You pull out the maybe 10 HOF/major rookie cards in the set and figure the FMV of each, and when you add them up it totals $900. So for the valuation of the remaining 40 common cards in the set, I'd calculate the average value per card as follows:

$2,000 - $900 = $1,100 / 40 cards = $27.50 per card

For something like this, the best you are probably going to be able to do is to estimate values just like as in my above example. And if the executor/fiduciary of the estate does come up with an overall valuation/appraisal for the card collection, be sure to use that as your overall starting point to then be divvied up between all the different cards in the collection. Just like in my example above. if the entire collection were valued by the executor/fiduciary at $2,000, and you could really only find say 10 cards worth individually valuing and selling. Just spread the rest of the remaining collection value evenly over the rest of the cards. Just be sure to write what you're doing down so you have some record as to your method and logic. And be sure keep track of the cards you sell and what you sell them for.

And if on the off chance you ever did have to explain what you did to an IRS agent, they most likely will have no clue as to what you're talking about, or if they do know, will realize what an impossible PITA it is for you to be able to create completely accurate records, and will likely give you the benefit of the doubt and agree with you as long as what you're doing seems at least somewhat reasonable and consistent. Unless you do end up inheriting some really, really big value cards, IRS agents aren't likely going to waste a lot of time and effort, if any, questioning your estimating their valuations when you sell them.

Hope this helps.