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
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