Cost basis - Warning tax related topic

Stupe the Second Sacker · #1 09-10-2022, 10:49 AM

Quote:

Originally Posted by BobC

And unless you're a dealer filing and reporting your card activity as a business, you'll most likely be filing and reporting your card activity as a collector/hobbyist, in which case you don't want to show any losses for items you sold. If you are into cards as a hobby, you have to report and pay tax on any gains you may have had from your sales, but for any sales losses they aren't deductible, and you just end up reporting them as $0 gain/income on your return.

Yes...First, thank you to all who responded constructively. This has been very helpful I'm sure to many people.

I want to be sure I understand the section above because I was thinking I could net sales out and as long as the result was not a loss, I was good. But it sounds like you're saying this:

Example using small numbers for simplicity...If I sell 10 items and seven of them sell for $1000 each (plus $7000) and the other 3 I lose $1000 each (-$3000), I pay taxes on $7000 and not the net result $4000. Correct?

raulus · #2 09-10-2022, 10:59 AM

Quote:

Originally Posted by Stupe the Second Sacker

Yes...First, thank you to all who responded constructively. This has been very helpful I'm sure to many people.

I want to be sure I understand the section above because I was thinking I could net sales out and as long as the result was not a loss, I was good. But it sounds like you're saying this:

Example using small numbers for simplicity...If I sell 10 items and seven of them sell for $1000 each (plus $7000) and the other 3 I lose $1000 each (-$3000), I pay taxes on $7000 and not the net result $4000. Correct?

All depends on whether you are:

1) a dealer
2) an investor, or
3) a personal collector.

I realize that term #2 carries a lot of baggage around here, so people are loathe to suggest that they are an investor. But you might find that the tax outcomes are a lot better as an investor! Just don�t tell anyone on this board about your tax filing position.

This article might help a bit as well, in terms of understanding some of the differences:

https://frblaw.com/2022/01/04/tax-co...s-card-market/

Stupe the Second Sacker · #3 09-10-2022, 11:18 AM

Quote:

Originally Posted by raulus

All depends on whether you are:

1) a dealer
2) an investor, or
3) a personal collector.

I realize that term #2 carries a lot of baggage around here, so people are loathe to suggest that they are an investor. But you might find that the tax outcomes are a lot better as an investor! Just don�t tell anyone on this board about your tax filing position.

This article might help a bit as well, in terms of understanding some of the differences:

https://frblaw.com/2022/01/04/tax-co...s-card-market/

Thank you. I will definitely read that article. But if I fall into the "personal collector" category is the answer in my example $7000 or $4000?

raulus · #4 09-10-2022, 11:24 AM

Quote:

Originally Posted by Stupe the Second Sacker

Thank you. I will definitely read that article. But if I fall into the "personal collector" category is the answer in my example $7000 or $4000?

Based on the new law that is commonly known as TCJA, deductions from hobbies are no longer allowed. So you have all the income, and none of the losses or deductions.

I�m guessing that we�ll have a lot more closet investors around here�at least for tax purposes.

Stupe the Second Sacker · #5 09-10-2022, 11:42 AM

Quote:

Originally Posted by raulus

Based on the new law that is commonly known as TCJA, deductions from hobbies are no longer allowed. So you have all the income, and none of the losses or deductions.

I�m guessing that we�ll have a lot more closet investors around here�at least for tax purposes.

Thank you and that certainly stinks.

I'd guess that as well. Either that or Biden will have successfully turned us all into businessmen.

Wonder what the criteria to meet is for being an investor? Holding for a certain period? I'll check the article.

Thanks again

raulus · #6 09-10-2022, 11:52 AM

Quote:

Originally Posted by Stupe the Second Sacker

Thank you and that certainly stinks.

I'd guess that as well. Either that or Biden will have successfully turned us all into businessmen.

Wonder what the criteria to meet is for being an investor? Holding for a certain period? I'll check the article.

Thanks again

As outlined in the article, there�s not a distinct dividing line. It�s all facts and circumstances. In some ways, it could be as much of a question as how you view and approach it. Do you self identify as an investor? How often do you buy and sell? Do you make money at least sometimes when you do sell?

I would guess that anyone who sells even every once in a while, and makes a little money doing it on some sales is going to be fine claiming to be an investor.

Of course, all of the people running around here proclaiming that they will never ever sell no matter the price might have a harder time. But if they actually never sell, then they wouldn�t care anyway, because they�ll never have a gain or a loss, so there�s no tax consequences to them, at least under current tax law.

Now if the government gets around to implementing some of the proposals on taxing appreciated property, especially if they lower the thresholds low enough, then that would be a different scenario. But Bernie and his friends are likely to have a hard time getting that through, at least at thresholds that are low enough to effect most collectors.

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