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  #11  
Old 11-14-2017, 01:42 PM
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Kevin
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Here is another good article that I just found with a Google search:

http://1040return.com/collectibles-tax-collector/
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  #12  
Old 11-14-2017, 01:49 PM
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Originally Posted by sb1 View Post
That is what I believe to be correct, further you cannot deduct any "expenses" incurred such as bank box, insurance, grading, etc.
Scott,

You are correct that you can't deduct those expenses in the current year as "investment expenses" on line Schedule A line 23. What you can do is bake those expenses into the basis of the cards. Instead of taking the expenses against ordinary income at the time, you're taking them against capital gains at the time of disposition. Whether it makes any difference in the end depends on your relative income levels at the time of the two events.

It can get very messy trying to apportion group expenses such as an insurance policy among a whole box of cards, but it can be done. Just keep records.

Bill
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  #13  
Old 11-14-2017, 02:30 PM
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Originally Posted by GregMitch34 View Post
Bill--

Thanks for your lengthy and mostly clear reply. But perhaps one example might help a little. Let's say you sell 30 cards via an AH for let's say $30,000. They take their $6000 which I can you report as fee or whatever. Of the $24,000 you get you judge that you only made about $4000 above what you paid for those same cards. However, each card is different--on some you made big profit, on others loss; some you purchased ten years ago, others in past year. The ones from long ago you may not even recall what you paid so you are guessing. So what do you report here? Just a straight $4000, or $24,000 minus whatever, or you submit a breakdown of all 30 cards as best you can? Thanks.
As birdman42 said, since you aren't considered to be in the business of selling baseball cards as a dealer, the sale is treated similarly to sales of capital assets like stock. You would normally report the sale of each individual stock separately, showing the original cost basis for each against the sale price of each, less any "selling expenses" you incurred. There is an exception if you do all your stock trading through a specific investment account and the sales activity is appropriately being reported to the IRS. In those instances you can get away with just reporting the total sales proceeds, total costs basis and total selling expenses of the various categories of long or short term gains, and attaching a copy of your 1099-B form or other statements from your investment firm that shows all your stock trading activity for the tax year.

Technically you are supposed to do the same thing with the sale of cards and report the sale of each one as a separate activity. As others pointed out already, it is unlikely that auction houses are reporting your sales activity to the IRS, and you can always ask them up front before selling through them what their policy is on that just to make sure. Truth is, there is no special form or requirement that auction houses report sales info to the IRS currently. You only sold 30 cards in your example so it would be fairly easy to know what your sales proceeds were for each card/lot sold, and also the amount of commissions/selling costs you had for each card/lot sold. As you said though, the problem is going to be in coming up with the cost basis for each card/lot that was sold. Since in your example I assume you sold the cards all in the same auction, rather than trying to report and calculate the gain or loss on each individual card, I would suggest simply reporting them as one large group and report the total sales proceeds and commissions/selling costs for what they actually were. Now for the costs basis, I would suggest gathering as much detail and records as you do have for any of the cards in the group being sold, and then do your best job of estimating what you have into the remaining cards you can't find specific cost records or data for. Write down and record everything you can think of that would collaborate or support you estimated cost basis and then use that to report your calculations on your tax return. That way if the IRS ever did come back and challenge your figures you would have documented to the best of your ability what your correct basis in the cards was. It may not be perfect but, it demonstrates that you tried your best to determine your basis in the items being sold and, believe it or not, IRS agents are not always evil goons that demand exact documentation for everything.

Now that is what I would suggest if you ended up having a net gain on the sale of all the cards. If you end up with what you feel is a net loss instead, it may not be as cut and dried that you automatically get to deduct that loss against other gains or income you may have. That is because losses from the sale of items that are considered as personal use property (such as the sale of your car) are not deductible in any instance. And just because you have and collect old baseball cards does not automatically make you an investor, and the cards themselves investments, whereby you would be able to calculate and deduct your losses on such sales as capital losses. You sound like you are mostly a collector, with no long-term track record of purchasing and selling cards. As such, if you suddenly reported a loss, especially a sizable loss, from the sale of cards on your tax return, that could cause you to get some additional scrutiny, A potential IRS argument could be that you are a collector and your cards were not specifically for investment purposes, and therefore you would/could be denied deductibility of the losses because they considered them personal use property of yours instead. And if you tried taking the losses claiming you had entered into the card business, you may come up against the hobby loss rules and get deductibility denied on that count because you have no history of ever having made money selling cards. In such an instance, if you end up with a loss, your best bet may be to just report nothing on your tax return instead.

The best answer to your question depends a lot on the specific facts and circumstances in your particular case. It is not always a straight forward, objective answer, and something you should run by your tax advisor.
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  #14  
Old 11-14-2017, 02:45 PM
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.

Last edited by birdman42; 11-14-2017 at 02:46 PM. Reason: duplicate post
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  #15  
Old 11-14-2017, 05:20 PM
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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.
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  #16  
Old 11-14-2017, 05:28 PM
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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.
You could just do like 99.9% of people do, sell the card and pocket the cash.

I am not a tax expert but I did get a lecture from my accountant on the subject last year.
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  #17  
Old 11-14-2017, 06:44 PM
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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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  #18  
Old 11-14-2017, 06:59 PM
RedsFan1941 RedsFan1941 is online now
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i have little doubt there is some good advice in this thread. however, i would be cautious seeking tax help on a public chat board in which some of its members think the solution to not receiving an auction catalog is to post days or weeks after the auction has ended that they never got one.
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  #19  
Old 11-14-2017, 11:04 PM
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Quote:
Originally Posted by Baseball Rarities View Post
I did not see where you mentioned that the maximum rate is increased from 15% to 28% for long term capital gains.
The max rate for long-term capital gains is 20% for those in the top bracket, unless those gains come from collectibles. See post #8 for an example that puts numbers with the theory.

Bill
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  #20  
Old 11-15-2017, 09:45 AM
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Fortunately, I have always lost money on the sale of every collectible I have ever owned. I swear.
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