[Lorewalker]

Originally Posted by Rhotchkiss

Bob, I just took a deep dive into the topic. Two things I did not realize struck me as particularly noteworthy and worth posting about:

1. Only “investors” in collectibles may take a capital loss on the sale of a card (if sell for a loss). All you avowed collectors, who expressly state your collections are for enjoyment and personal use only, have publicly announced to the IRS that you are not entitled to a tax loss on the sale of a card. Just hope things keep going up! Or, like some of us, admit that you buy cards for investment, and you have strong proof of intent and thus entitled to take losses. You must recognize gains (at 28%) regardless of whether you own cards for investment or as a hobby. But only investors, and not collectors, can take losses.

2. Those who are in the business of buying and selling cards do not get 28% gains treatment, but instead have ordinary gains and losses from business operations. For many, ordinary tax rates are higher than 28%. This begs the question: are those who obtain retail sales certificates (to avoid paying state taxes), effectively declaring they are in the trade or business of selling cards and thus subjecting themselves to ordinary gain, rather than 28%?

Assuming the answer to the 2nd question is “yes”, seems the best tax move currently for individuals (not dealers) is to post on message boards that you invest in cardboard and don’t get a resale certificate to avoid state taxes.

Resale Licenses only permit avoidance of paying state sales tax which is different than state tax.