Heritage Rosen Mantle - Greatest Card Ever Auctioned?

[BobC]

Originally Posted by Johnny630

Bob C I have a question for you, what would the consignor's tax burden be on the card ??

Paid $50,000 in 1991

Sale in 2022

Let’s say Heritage Gives him Zero commissions so he gets the hammer price minus the buyer's premium or maybe he gets a negative 5%.

It is a little hard to say since the card hasn't sold yet, and we don't know what the final price will be. Here's a ballpark formula you can use to figure approximately what the seller may owe.


(Net Amount Seller Actually Receives From Heritage - $50,000) X 20% = Approximate Federal Income Tax Due


This assumes the seller is not a dealer, so the sale is treated as a Long-Term Capital Gain (LTCG) by the seller since he held the card for more than a year. And for federal income tax purposes, the maximum tax rate on a LTCG is currently at 20%. So if after the card sells, and Heritage deducts all it's commissions fees and so on, say they end up sending the seller a check for $10,000,000.


($10,000,000 - $50,000) X 20% = $1,990,000


Now remember, this is only for the supposed U.S. federal income tax on the sale. We don't even know if the seller is actually a U.S. citizen, and therefore subject to U.S. income tax on this sale to begin with. And if the seller is a U.S. citizen, we still don't know what state/city they live in as there could be additional state/local income taxes on this sale as well.

And speaking of taxes, depending on where the buyer lives and is having the card delivered to, there's also the possibility the buyer can end up paying sales tax for this purchase as well, on top of the actual hammer price plus the buyer's commission. So the final cost to the buyer for this card could end up being even more than some people realize.

Here's something to think about in regards to that T206 Wagner card that Golding just brokered a private sale of for $7.2M. How much would you like to bet the buyer in that private deal may have left that card in Goldin's hands, in their vault in Delaware? Delaware has no sales tax so leaving that card with Goldin could save the buyer a lot of money. The sales tax where I live is 8%, so in that case, if I had bought that card for $7.2M and then left it with Goldin, I would have saved $576,000 in sales tax. In the case of this Rosen Mantle card, if it does go for sale over $10M, the sales tax savings by having it sent to a vault where there are no state sales taxes could easily result in a saving of $800K or more to the buyer, depending on the buyer's home state and final selling price. And this is exactly why those companies that have set up vaults did so, to help attract sales and deals like this that they can score huge commissions on.

And depending on the state the buyer lives in, there could also be other, non-income taxes due as well by the seller/auction house. For example, Ohio has something known as the Commercial Activity Tax (CAT tax), which calls for all sellers to pay a tax of 2 mills (0.26%) on all gross sales made to buyers/consumers in the state of Ohio. So if the Rosen Mantle was sold to someone in Ohio for say $10M, knock off the first $1M and figure the CAT tax due Ohio as approximately $9,000,000 X 0.0026 = $23,400. And if Heritage already had reached $1M in gross sales to Ohioans and Ohio businesses for the calendar year, the CAT tax due on that $10M sale would most likely be for the full $26,000. I would assume that Heritage in their contracts has such additional potential taxes and costs coming out of the seller/consignor's pocket, in which case the seller at least gets a little bit more of a deduct for federal income tax purposes.