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Old 11-14-2017, 06:44 PM
BobC BobC is offline
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Join Date: Apr 2009
Location: Parma, Ohio
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Quote:
Originally Posted by insidethewrapper View Post
I think I'll just keep everything and let my estate have it and pay no taxes. For example: If I bought a card at $ 1000 five years ago and sell it now at $ 2000 I would have additional income of $ 1000. If I die and my son gets it, he gets it at current market value $ 2000 and sells it at $ 2000 therefore no tax. Doesn't matter what the purchase price was. At least that what I have been told.

No, I'm not a tax expert, but I did sleep at a Holiday Inn recently.
That may change depending on what ends up happening with the Republican tax reform plans. (And no Leon, this is not a political commentary, it is tax planning for what we can do with our cards when we pass on.) Part of the proposed tax reform program talks about doing away with estate taxes. Under the current tax law, when you pass and leave items to your heirs, the entire estate gets valued at fair market value when you pass and is subject to estate tax. Most people don't have to worry about paying any estate taxes because the government allows each of us to currently pass on $5.49MM ($10.98MM for a married couple) in net estate value to our heirs, and owe no estate taxes. But because the assets being passed on were subject to being valued at their then fair market value (FMV) and potentially subjected to estate tax, the heirs get to receive these inherited assets at their "stepped up" fair market value.

So as the OP said, under current law if he passes away and leaves a $2K card that he paid $1K for to his son, his son can then sell the card using the current $2K FMV and have no gain on the sale and owe no tax. Now I don't know how the final version of any Republican tax reform laws will read but, if they do away with estate taxes entirely, I would also assume they then do away with this basis "step up" that inherited assets are getting under current estate tax law. In that case, if the OP passed and left his son the $2K card that he only paid $1K for, it would stand to reason that the son would inherit the card, and the deceased's $1K cost basis in the card. So now when the son goes to sell the card for its current $2K FMV, his basis is only $1K and he now has a $1K gain to pay tax on.

Like I said, no one knows what the final tax laws will look like in regards to estate taxes under Republican tax reform, or if it will ever even pass. But just remember that if the "Basis Step Up" goes away along with estate taxes, the 99+% of people that pass away without currently owing any estate taxes and can leave their children their card collection pretty much tax free if the kids sell it right away, may now be leaving their kids a potential tax hit if they go to sell the card collection and have to use their parent's basis in the collection for determining gain on the sale. Oh, and don't get me started on how will the kids even know (and prove) what their parent's cost basis was in the collection to begin with.
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