Selling in volume regarding taxes.

[egbeachley]

Originally Posted by Leon

Bill- great stuff and thanks for posting. So I have a question as a layperson. As I said before, I have a CPA and another (EA) accountant who do my taxes and books so I won't personally make mistakes (and they are pretty good and don't make many). But if I buy a near set of 520 T206s, and ascribe my cost basis of $50 for each one, and add or subtract the sale price of each one, why wouldn't that work?

Think of it this way, by using an extreme example. let's say you arrange a purchase of a T206 Plank for $50,000. But right before the purchase is completed you ask for the seller to throw in 4 T206 beaters that are essentially worthless. By using this method you have given yourself 5 cards with a $10,000 cost basis each.

During the next 4 years when you are in a 30% tax bracket you sell other cards and make a profit of $10,000 but also sell one of those T206 beaters for 1 cent. Your profit becomes $0 for each of those 4 years. 10 years later you eventually sell the Plank for $60,000 which gives you a $50,000 profit but you sell it the year after you retire and are in a 10% tax bracket.

Years 1-4 profit should be $10,000 and if in 30% tax bracket = $12,000 taxes.
Year 15 profit should be $10,000 and if in 10% tax bracket = $1,000 taxes.

Instead you have $50,000 profit in 10% tax bracket = $5,000 taxes.

So, in other words, if you apply high and low valued cards the same you can manipulate sales to lower your tax bill.

[Jantz]

Steven

It may be possible to write of your internet bill as an expense too.

I'm no CPA, so maybe Bill can clarify that for you here.


Jantz

[ValKehl]

Hi Bill,
Thanks for the comprehensive info you presented in Post #8. Do I correctly understand that this info applies only to sports collectibles "dealers" (selling at shows, on-line, and/or via brick-&-mortar shops)? If you are "dealing" with a profit intent, then it's Form 1040-Line 12, supported by Schedule C. If you are "dealing" without expecting to make a profit, the IRS considers you a hobbyist, and your net sales (gross sales less cost of sports collectibles sold) go on Form 1040-Line 21, and your operating expenses are deductible on Schedule A (if you itemize, and subject to the limitation you described).

But, I believe most of us Net 54 members are merely "collectors" whose do sell some of our sports collectibles from time to time as we upgrade items in our collections, change our collecting focuses, etc. Is my understanding correct that when "collectors" do this, we come under the IRS's rules for gains on the sales of "collectibles" which I believe are taxed at 28%? Since sports collectibles are considered capital assets, this involves reporting capital gains on Form 1040-Line 13, supported by Schedule D, supported by Form 8949 (for most folks, I think), along with using the 28% Rate Gain Worksheet and the Schedule D Tax Worksheet in the Form 1040 Instructions book - right?

If my comments above about "collectors" are correct, how does the IRS distinguish between a "collector" selling "collectibles" and a "dealer" who does not have a profit intent? Would it be the amount and frequency of selling activity? The reason I ask is I have always used the Schedule D-Capital Gains approach, as I was not aware of the Form 1040-Other Income approach (which seems to me to be much simpler, to the extent that anything is simple when it comes to income tax forms and rules!) (and, which could result in a less-than-28% tax rate) that you described in your post.

Thanks in advance for your response,
Val