Would you take this deal?

[Schwertfeger1007]

For me it depends on the player/card which you go to great lengths to not mention. Or maybe I'm just curious

Since you are worried about the tax implications, one thought would be to take another card equal to the 120% that has upside and you can hold on to in an effort to defer the taxes until you are retired and can sell while living on a lower income / tax rate.

[raulus]

Originally Posted by Schwertfeger1007

For me it depends on the player/card which you go to great lengths to not mention. Or maybe I'm just curious

Since you are worried about the tax implications, one thought would be to take another card equal to the 120% that has upside and you can hold on to in an effort to defer the taxes until you are retired and can sell while living on a lower income / tax rate.

Getting a second card doesn’t solve the tax problem.

I still get to pay taxes, even on trades.

But with the all trade version, I now have no cash to pay for my taxes.

[BobC]

Nic,

I think you just answered your own question in explaining how the taxes may work to these others posting. If you are possibly going to trade down in condition, and the cash you get is going to go mostly for taxes, all you've accomplished is bumping up your tax basis, while lessening the quality of your collection. Why in the hell would you do that, especially since you aren't planning on selling this item anytime soon.

They only way I would ever think of doing such a deal is if you could keep the slightly lower condition item, AND now have a sizable chunk of money to go out and pick up other things you want for your collection. Based on your possibly not so great tax impact, you already know this answer yourself, and am a bit surprised you even have to ask for everyone else's help. Or was this a trick question for everyone to see who would figure it out. If so, good one. LOL

[Mark17]

I'm not a tax expert and I don't play one on TV, but do you have a monster box of Gregg Jefferies rookies, or some other collectibles you could sell at a big loss, to offset this transaction? Would that work?

[RCMcKenzie]

I am not a tax attorney, but there are many on here who can chime in.

I don't view baseball cards as a commodity on par with gold. "I bought this gold brick of 5 ounces at x price in 2015 and I'm trading now for 8 ounces of gold." in this example, you have a gain.

If you bought an sgc 4 Ty Cobb with an Old Mill back in 2015, and today you trade it for a PSA 2 Ty Cobb with an Old Mill Back, and a Larry Doyle E103 CSG 4 undergraded, then I think you don't realize a gain until you sell, years down the road with your original buy price of your sgc 4 cobb as your basis.

[BobC]

Originally Posted by RCMcKenzie

I am not a tax attorney, but there are many on here who can chime in.

I don't view baseball cards as a commodity on par with gold. "I bought this gold brick of 5 ounces at x price in 2015 and I'm trading now for 8 ounces of gold." in this example, you have a gain.

If you bought an sgc 4 Ty Cobb with an Old Mill back in 2015, and today you trade it for a PSA 2 Ty Cobb with an Old Mill Back, and a Larry Doyle E103 CSG 4 undergraded, then I think you don't realize a gain until you sell, years down the road with your original buy price of your sgc 4 cobb as your basis.

Rob,

You missed Nic's point about how there is no longer any Like-Kind Exchange tax rule in place for collectibles. If Nic just trades his card for someone else's card(s), he doesn't offset the current card values and end up with no tax due. He has to take what he originally bought his card for years ago, which then became his tax basis in that card, and compare it to the current FMV of the card(s) he trades it for. The difference in his card's tax basis, and what the current FMV of the card(s) he traded for, is current taxable gain to Nic. Even if there is no cash involved.

We both know of course that a lot of collectors doing such a private deal will likely not report anything about the trade/sale to the IRS, and thus pay no tax on it. Especially since in a trade, there really isn't any third party required to prepare and file a 1099 for either party to the trade, and then send a copy to the IRS as well. But I've said this before here on the forum, many times prior to Nic, that trades are considered the same as taxable sales of cards for cash by the IRS. And the same goes for any dealers that get involved in a trade as well. It is up to the collectors/dealers to be honest and calculate their gain/income on such a trade, and then report it on their income tax return(s) and pay the resulting taxes due.

[BobC]

I'm not a tax expert and I don't play one on TV, but do you have a monster box of Gregg Jefferies rookies, or some other collectibles you could sell at a big loss, to offset this transaction? Would that work?


Sorry Mark, nice try though. LOL

If you are a collector, selling your collectibles, you cannot deduct any losses from the sale of one against the gains from another.

Now, and I've said this on the forum before as well, if you can prove to the IRS somehow that you were not a collector, and that you actually bought your card(s) strictly as investments, then you can offset the losses against other gains, and potentially against other income as well. And if you could do that, convince the IRS you card(s) were not collectibles and were only investments, your federal long-term capital gains tax rate would be maxed at 20%, not the 28% it is for collectibles.

The problem is that the IRS has historically viewed and defined sports cards pretty much all as just collectibles. It is only most recently that sports cards are starting to look more like a possible type of investment after all. Trick is how to then convince the IRS to agree with that assessment for cards you bought strictly as investments. It will probably take someone willing to go to court with the IRS, and winning their case, for that to happen. And unless we are talking about a T206 Wagner, or some other cards in the six to seven figures, and up, range, I can't see anyone willing to spend the time and money to fight the IRS in court to prove that sports cards can also be investments as well for tax purposes. But I can see someone eventually trying to fight the IRS on this down the road.

[RCMcKenzie]

Thanks for the info, Bob. My accountant has always advised me to never sell, it's too complicated. In your scenario, I have zero interest in trading baseball cards. I thought it would be a tax free exchange, with a deferred tax due.

[BobC]

Originally Posted by RCMcKenzie

Thanks for the info, Bob. My accountant has always advised me to never sell, it's too complicated. In your scenario, I have zero interest in trading baseball cards. I thought it would be a tax free exchange, with a deferred tax due.

Nic mentioned this earlier, when the new tax law overhaul and changes from 2018 went into effect, they also amended Section 1031 of the Internal Revenue Code, which dealt with Like-Kind Exchanges. After the amendment to that section of the tax code, the only thing you can exchange/trade with potentially no current tax consequences is real estate (land and buildings). That is it now.

And your accountant sounds like he/she is no dummy. Let me guess, you probably don't have perfect records that show everything you ever paid for all the items in your collection, right? And you may have hundreds (or even thousands) of cards as well. If you go to sell off a big chunk of your collection, your accountant ends up potentially having to list and report every single card you sell as a separate taxable transaction on your tax return. That is if you are a collector or investor. If you're a dealer, it is actually a little easier in that you only have to report your sales in total, but the tax consequences can be even worse because now you're talking ordinary income, not capital gains, and you can be subject to self-employment taxes (social security and Medicare) on top of your income taxes as well if you're a dealer. Fun, fun, fun!

[jethrod3]

Given all that I've heard, I would keep the card, along with the satisfaction that I owned the best of its kind!! We are our stories, and that, and your offer, is one great story that can be told at numerous cocktail parties!

[Michael B]

After giving Bob a timeout for a double post I have a question that is more about aesthetics.

You state that you are a registry fool. I would guess that PSA's registry actually means something to you. If that is the case, my question would be: How would you feel knowing that the best card in that grade of a set I guess you collect is no longer owned by you and you only own the second best card? Or better yet - What on God's green earth are you thinking????

Why would you give up the best card in your collection for a few dollars if you do not need the money?

I read your post before anyone else answered and these were my first thoughts.

[BobC]

Originally Posted by Michael B

After giving Bob a timeout for a double post I have a question that is more about aesthetics.

You state that you are a registry fool. I would guess that PSA's registry actually means something to you. If that is the case, my question would be: How would you feel knowing that the best card in that grade of a set I guess you collect is no longer owned by you and you only own the second best card? Or better yet - What on God's green earth are you thinking????

Why would you give up the best card in your collection for a few dollars if you do not need the money?

I read your post before anyone else answered and these were my first thoughts.

Exact same thing I was thinking as well when I mentioned why would you want to trade down on your card, but really get nothing in return but an increased tax basis? He already said he wasn't going to be selling this card anytime soon, so you're absolutely right, it seems like a dumb thing to do as a collector, Registry or no Registry even.

And the double posts just happen. I only click the submit button once, but occasionally it double, or even triple posts. No idea why, but have seen it happen to others on here as well.

[RCMcKenzie]

Thanks, Bob. I feel like you should send me a bill for consulting. I don't do much selling or trading, but lots of buying. They used to have something called a casual sale. I actually have pretty good records on my cards.

[Michael B]

Originally Posted by BobC

Exact same thing I was thinking as well when I mentioned why would you want to trade down on your card, but really get nothing in return but an increased tax basis? He already said he wasn't going to be selling this card anytime soon, so you're absolutely right, it seems like a dumb thing to do as a collector, Registry or no Registry even.

And the double posts just happen. I only click the submit button once, but occasionally it double, or even triple posts. No idea why, but have seen it happen to others on here as well.

I was thinking that it must be some quirk in the system, possibly the isp.

[Mark17]

Originally Posted by BobC

If you are a collector, selling your collectibles, you cannot deduct any losses from the sale of one against the gains from another.

Bob,
Suppose I trade you a green T206 Cobb and a monster box of 1988 Fleer Jefferies. I paid $3,000 for the Cobb and $25,000 for the Jefferies. My total cost basis is $28,000.

I receive from you a lower grade green Cobb, current market value $18,000, plus $10,000 cash. From a tax perspective, isn't that a break-even deal for me?

[BobC]

Originally Posted by Mark17

Bob,
Suppose I trade you a green T206 Cobb and a monster box of 1988 Fleer Jefferies. I paid $3,000 for the Cobb and $25,000 for the Jefferies. My total cost basis is $28,000.

I receive from you a lower grade green Cobb, current market value $18,000, plus $10,000 cash. From a tax perspective, isn't that a break-even deal for me?

Mark,

I see what you're trying to do, hopefully bundle a couple items together as one combined tax basis to take advantage of the taxable loss on part of what you are looking to trade. Technically, the IRS would still view the Cobb and Jeffries cards as separate collectibles items, which should then be reported on your tax return as separate sales, even though you traded them both together for something else. You'd end up allocating the sales price, which would be the current FMV of the card(s) you traded for, based on the then current FMV of the items you are trading. Or at least that is what you should be doing.

Now if you were to try listing the Cobb and Jeffries cards together as though they were just one item being sold on your tax return, say you called it "sports card collection" as the item being sold, and listed the tax basis as the $28K in your example, you might be able to get away with it if the IRS doesn't come calling for clarification on what is in the card collection? You basically end up playing what is commonly referred to in the tax world as the IRS "audit lottery". You file a knowingly false return, and pray you don't get caught/picked and audited by the IRS. I would never recommend or advise anyone to be doing that. But I also know that many, many people do just that kind of thing on their tax returns all the time.

[Mark17]

Originally Posted by BobC

Mark,

I see what you're trying to do, hopefully bundle a couple items together as one combined tax basis to take advantage of the taxable loss on part of what you are looking to trade. Technically, the IRS would still view the Cobb and Jeffries cards as separate collectibles items, which should then be reported on your tax return as separate sales, even though you traded them both together for something else. You'd end up allocating the sales price, which would be the current FMV of the card(s) you traded for, based on the then current FMV of the items you are trading. Or at least that is what you should be doing.

Now if you were to try listing the Cobb and Jeffries cards together as though they were just one item being sold on your tax return, say you called it "sports card collection" as the item being sold, and listed the tax basis as the $28K in your example, you might be able to get away with it if the IRS doesn't come calling for clarification on that is in the card collection? You basically end up playing what is commonly referred to in the tax world as the IRS "audit lottery". You file a knowingly false return, and pray you don't get caught/picked and audited by the IRS. I would never recommend or advise anyone to be doing that. But I also know that many, many people do just that kind of thing on their tax returns all the time.

Thanks Bob. I'm not in that situation, but I would've thought what I proposed would've been OK to do, and not a "trick." I appreciate your clarification. I do agree with you that when it comes to the IRS, it's best to play by the rules and sleep well at night.

[JustinD]

Originally Posted by raulus

Getting a second card doesn’t solve the tax problem.

I still get to pay taxes, even on trades.

But with the all trade version, I now have no cash to pay for my taxes.

As a man reporting your gains on a straight trade, while perfectly logical and the right thing to do...you my friend are a saint.

[raulus]

Originally Posted by JustinD

As a man reporting your gains on a straight trade, while perfectly logical and the right thing to do...you my friend are a saint.

Less a saint and more a tax professional who doesn't want to lose my CPA license and thereby kill the golden goose in order to save a bit on my taxes.