Reporting sales of large $$ items

Fred · #1 11-15-2021, 10:03 AM

Quote:

Originally Posted by BobC

Are you actually asking about the correct way to determine taxable income from card sales, and then how to properly report it on your federal tax return, or are you just asking others on here to say whether or not they even bother reporting any, some, or all of their income from card sales on their tax returns?

If it is the former, I can probably help with that.

If the latter, please keep in mind this is a public forum so any IRS, state, or local tax official can simply come on here then and see people talking about how they don't report and pay taxes on all their income from card sales. So do you really, really, really, really, really think it is a good idea to put such a questionnaire poll like that on here so people can publicly respond and possibly incriminate themselves for tax evasion?

Are the polls taken on this board "anonymous"? If so, then polling responses would be interesting.

Thank you for the additional information.

darkhorse9 · #2 11-15-2021, 10:18 AM

Not looking to delve into any political debates (please) but there currently is a proposal to make "Unrealized capital gains" taxable. That basically means that if you bought a card 20 years ago for $100 and it's current value is $5,000, you would be taxed on the $4,900 worth of value your item has today even if you don't sell it. You would be taxed just for having it.

This is for informational purposes only...not for political debate.

conor912 · #3 11-15-2021, 10:21 AM

Maybe the $600 rule will significantly boost buying and selling at shows?

BobC · #4 11-15-2021, 06:22 PM

Quote:

Originally Posted by conor912

Maybe the $600 rule will significantly boost buying and selling at shows?

Or other sources like the B/S/T threads on here.

hockeyhockey · #5 11-15-2021, 06:45 PM

Quote:

Originally Posted by BobC

Or other sources like the B/S/T threads on here.

it could also really open up the trading market. i'd personally prefer to trade all day long, since that's basically what i'm doing anyway. sell something to buy something else.

BobC · #6 11-16-2021, 01:04 AM

Quote:

Originally Posted by hockeyhockey

it could also really open up the trading market. i'd personally prefer to trade all day long, since that's basically what i'm doing anyway. sell something to buy something else.

Not so fast there!

You do know that if instead of selling someone a card for money, you trade a card(s) you have for a card(s) that someone else has, that technically in the IRS' eyes you just completed a taxable sale? And that goes for whether you're a Dealer, Collector, or Investor. Now, will the IRS ever likely know about it? Probably not, unless you or the person you traded with informs them. But just letting you and everyone know, even a card trade is supposed to be reported as a taxable sales transaction on your income tax return.

And before anyone jumps on to try telling me I'm wrong because of the Like-Kind Exchange rules, please note that in regard to Section 1031 of the IRC, in the case of cards, that probably would have worked only if you and your buddy swapped the exact same card. But that was in the past anyway since the tax law changes passed and enacted when Trump was in office in 2018 also included changes to the Like-Kind Exchange rules of Section 1031 of the tax code, where going forward, Like-Kind Exchange tax treatment only applied anymore to exchanges of real estate, period!

conor912 · #7 11-15-2021, 10:23 AM

Quote:

Originally Posted by darkhorse9

Not looking to delve into any political debates (please) but there currently is a proposal to make "Unrealized capital gains" taxable. That basically means that if you bought a card 20 years ago for $100 and it's current value is $5,000, you would be taxed on the $4,900 worth of value your item has today even if you don't sell it. You would be taxed just for having it.

This is for informational purposes only...not for political debate.

Interesting. Can you post a source?

Papergoy · #8 11-15-2021, 11:39 AM

The unrealized gain is only currently being debated (if it's even getting any traction) on billionaires as I recall. AT THIS TIME it would not apply to average folk- only saying AT THIS TIME as often once a tax is established...

I run a business, and thus if I sold cards they would go through my schedule C. Of course I'd be liable for both halves of the FICA etc. But if I remember my rules correctly, for anyone not running a business, the gain is reported as a capital gain (just google capital gains on collectibles to read for yourself).

And I am certain everyone pays all taxes due.

JustinD · #9 11-15-2021, 11:51 AM

Why is no one discussing capital losses to offset on these taxes? How often do we read of those posts the discuss a loss.

If we are cuffed into these nonsensical taxes on used goods we should be using the opposite to offset. This is commonplace in gambling and investments.

BobC · #10 11-15-2021, 06:45 PM

Quote:

Originally Posted by JustinD

Why is no one discussing capital losses to offset on these taxes? How often do we read of those posts the discuss a loss.

If we are cuffed into these nonsensical taxes on used goods we should be using the opposite to offset. This is commonplace in gambling and investments.

I have written about losses on various other threads on this forum already. But first off, why do you refer to such taxes as "nonsensical", can you explain what you mean by that?

Secondly, most tax discussions are not simple yes or no answers, so trying to give an accurate, general response can take up a lot of space. Also, you have three distinct types of card sale transactions that can occur depending on if the seller is a Dealer, Collector/Hobbyist, or an Investor, with the taxable outcome from a sale potentially (and probably) differing between all three types. And I would argue that any one of us selling cards can potentially be all three types of sellers at the exact same time, just to make things even more interesting and clear.

So do you maybe have a more specific question(s) you wanted to ask that won't take a novel to answer?

sb1 · #11 11-15-2021, 06:55 PM

I have never seen any reference in filing as to being an "investor" for cards, or coins or another genre. You are either in the business of buying and selling(legit entity) and file accordingly OR you pay the "collectibles" rate on any gains realized. How does one become an investor for tax purposes?? Which I presume would claim any gains at their appropriate capital gains rate based on their income level/AGI.

If that is an option, everyone in a low or no capital gains tier would claim they were investors and not collectors, thus avoiding the higher collectibles tax rate.

dacubfan · #12 11-15-2021, 11:56 AM

How many of us actually have documentation proof of what we paid for even some of the items in our collection? Therefore taxes will be due on the entire sale amount. I had planned to liquidate much of my collection while alive but am now rethinking that idea due to the tax implications. Instead upon my death my sons will receive a stepped up basis when they sell with little tax due unless they hold the items for another 20 years. Any thoughts on this approach? I've heard rumors of the stepped up basis being eliminated. Wouldn't doubt it.

Angyale · #13 11-15-2021, 12:18 PM

Where someone paid $100 for an item, the owner can only sell it for $500 due to market conditions at the time is sale but the “book value” is $1000 so the seller can claim a capital loss? You can’t have one scenario without the other. So if there is an unrealized capital gain, couldn’t there be an unrealized capital loss as well?

Angyale

RL · #14 11-15-2021, 12:51 PM

do not try to cheat the IRS. they will get you.

conor912 · #15 11-15-2021, 01:04 PM

It makes more sense as an ownership tax than an unrealized capital gain tax�.like taxes on real estate. You pay them every year even if you own the property outright. If it�s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

darkhorse9 · #16 11-15-2021, 01:40 PM

Quote:

Originally Posted by conor912

It makes more sense as an ownership tax than an unrealized capital gain tax�.like taxes on real estate. You pay them every year even if you own the property outright. If it�s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

Property taxes go up (or down) depending on what they are paid for. Things like schools, roads, sanitation. etc. The property owner gets value in return.

ownership tax would just be a general fund collection with no return value to the owner. Same with the unrealized capital gains tax

BobC · #17 11-15-2021, 10:17 PM

Quote:

Originally Posted by conor912

It makes more sense as an ownership tax than an unrealized capital gain tax�.like taxes on real estate. You pay them every year even if you own the property outright. If it�s a gain-related tax, that would be a nightmare to track for everyone, including uncle sam.

Which is a big part of the reason they may likely not do it.

BobC · #18 11-15-2021, 10:14 PM

Quote:

Originally Posted by Angyale

Where someone paid $100 for an item, the owner can only sell it for $500 due to market conditions at the time is sale but the �book value� is $1000 so the seller can claim a capital loss? You can�t have one scenario without the other. So if there is an unrealized capital gain, couldn�t there be an unrealized capital loss as well?

Angyale

That is another possible problem if the government were to pass a new "Mark to Market" tax law on some individual's and their investments/assets. Say you are subject to this tax law and buy something for $100 during the year. At the end of the year the item's value has jumped to $1,000, so you now have to report and pay the tax on your $900 gain. So you go to sell the asset to cover the tax due, but find out that since the prior year-end the value dropped down to $500, and you sell it for that. You still have to pay the tax on the prior year's $900 gain, but because of the sale, you've now created a $500 loss to report, but you have to wait to do that on next year's tax return. Ugh!

BobC · #19 11-15-2021, 09:56 PM

Quote:

Originally Posted by dacubfan

How many of us actually have documentation proof of what we paid for even some of the items in our collection? Therefore taxes will be due on the entire sale amount. I had planned to liquidate much of my collection while alive but am now rethinking that idea due to the tax implications. Instead upon my death my sons will receive a stepped up basis when they sell with little tax due unless they hold the items for another 20 years. Any thoughts on this approach? I've heard rumors of the stepped up basis being eliminated. Wouldn't doubt it.

Just because you may have to estimate things like basis of your cards doesn't mean you can't. Believe it or not, IRS agents are also people and can be reasonable and work with you. They are not like they often get reflected as in movies and on TV.

However, the idea of waiting till someone passes away so they can leave their card collection to whomever they wish, at a Stepped-Up tax basis equal to the FMV of the collection at the time of their passing, is a perfectly good and viable way to save on income taxes when/if the collection is sold, at least as the law currently stands.

You are also correct that there has been talk and rumors of possibly doing away with this Basis Step-Up provision under the current federal estate tax laws, but nothing has been passed into law yet, I'm not so sure that will happen either. The government wants money now, right? Well, by inclusion of a card collection in someone's estate, the then FMV of the collection becomes subject to federal estate taxes. Now you've already got a large chunk of the population screaming about how federal estate taxes are an unfair money grab by our government, and are tantamount to unfair double-taxation on the value of property and assets that the deceased person worked hard for over their entire life, and bought/paid for with money that had already been taxed (hence the double-taxation factor). So once the FMV value of the deceased's card collection has been subjected to the federal estate tax, whether any federal estate tax ended up being due on it or not, they Step-Up the basis of the collection to the FMV used for the estate tax calculation so they now don't potentially subject the card collection to triple-taxation when whoever inherited the collection sells it for more than what was originally paid for it (tax basis) by the deceased. The one thing I hadn't mentioned yet is that everyone also gets a federal estate tax exemption, kind of like the standard deduction everyone gets that they can take each year on their income tax return. The federal estate tax exemption just got bumped up to $12.06M per person, beginning in 2022. That means that normally when someone passes away in 2022, the first $12.06M of their estate value has $0 federal estate tax on it.

Now remember my saying how the government is always looking for more tax money? Well if the person in my example passes away in 2022 and their total estate at the time, including the card collection, is worth less than $12.06M, they pay no estate tax on the value of the collection. And then, whether they Stepped-Up the tax basis of the card collection or not, if the person who inherited the collection decides to keep and not sell it, the government has no sale to tax and gets diddly-squat. The easiest thing for the government to do to possibly speed up their tax collections then is to simply reduce the federal estate tax exemption they give everybody. Remember when Hillary ran against Trump, she talked about dropping the exemption all the way back to just $1M per person. By lowering the federal estate tax exemption enough in my example, the card collection could end up becoming subject to the federal estate tax after all, and the decedent's estate ends up paying the estate tax owed on that collection's value right now. So by dropping the federal estate tax exemption, the the government gets it tax money now, without having to pass laws to stop the Basis Step-Up of inherited property and getting accused of now trying to triple-tax it, and they don't have to wait for the heir to sell it. So that is my best guess, currently, as to what the government may/will do.

BobC · #20 11-15-2021, 08:05 PM

Quote:

Originally Posted by conor912

Interesting. Can you post a source?

Just Google and look for "proposed taxes on appreciated assets/investments/stocks", or even "Biden proposed taxes", and you should get lots of threads talking about the speculated changes the current administration may yet propose and try to pass as new tax legislation.

And the specific thing you're asking about in regards to possibly making people pay taxes on investments they own, but haven't acually sold, has a name to it, and is in fact already enforced on certain specific business taxpayers. It is called "Mark to Market". The idea is to impose this "Mark to Market" strategy on very well-off taxpayers by setting some as of yet undecided upon minimum threshold measure. Then when a taxpayer exceeds that threshold, they'll have to look at all their investment/stock holdings at the end of the tax year and see what their then current FMV is as of the year-end date. They would then compare that year-end FMV to what they actually paid (tax basis) for their investments, and to the extent the year-end FMV exceeded their tax basis, report that increase as taxable income on their return and pay the appropriate taxes on the appreciated (or unrealized) gain, as whatever they end up deciding those taxes (and the rates for them) are to be.

Nothing has been finalized in regards to this proposed idea yet, and none of it will matter if this isn't enacted into law. But, I wouldn't be surprised if it doesn't pass into law because while it would tax very wealthy people like Jeff Bezos when his Amazon stock goes up, by now taxing his unsold shares, that will reset Bezos' tax basis in those Amazon shares to the FMV they were taxed on. So then in the following year if the Amazon shares go down in value, Bezos could now in all likelihood claim a loss and possibly be due a big tax refund. Can already hear the masses screaming about how this is really just another tax loophole for the rich then.

And if this did somehow pass, I don't think anyone need worry about having to pay such taxes on their card collection. I would imagine the government would restrict any such "Mark to Market" taxes to only those investments/assets that have an easily discernible and universally accepted method in determing their year-end FMVs, like public traded stocks. The idea of otherwise having people be forced to get annual appraisals of their non-conventional assets/investments is sheer insanity.

Johnny630 · #21 11-15-2021, 08:09 PM

Now is the Perfect Time To Sell

Peter_Spaeth · #22 11-15-2021, 08:29 PM

Quote:

Originally Posted by BobC

Just Google and look for "proposed taxes on appreciated assets/investments/stocks", or even "Biden proposed taxes", and you should get lots of threads talking about the speculated changes the current administration may yet propose and try to pass as new tax legislation.

And the specific thing you're asking about in regards to possibly making people pay taxes on investments they own, but haven't acually sold, has a name to it, and is in fact already enforced on certain specific business taxpayers. It is called "Mark to Market". The idea is to impose this "Mark to Market" strategy on very well-off taxpayers by setting some as of yet undecided upon minimum threshold measure. Then when a taxpayer exceeds that threshold, they'll have to look at all their investment/stock holdings at the end of the tax year and see what their then current FMV is as of the year-end date. They would then compare that year-end FMV to what they actually paid (tax basis) for their investments, and to the extent the year-end FMV exceeded their tax basis, report that increase as taxable income on their return and pay the appropriate taxes on the appreciated (or unrealized) gain, as whatever they end up deciding those taxes (and the rates for them) are to be.

Nothing has been finalized in regards to this proposed idea yet, and none of it will matter if this isn't enacted into law. But, I wouldn't be surprised if it doesn't pass into law because while it would tax very wealthy people like Jeff Bezos when his Amazon stock goes up, by now taxing his unsold shares, that will reset Bezos' tax basis in those Amazon shares to the FMV they were taxed on. So then in the following year if the Amazon shares go down in value, Bezos could now in all likelihood claim a loss and possibly be due a big tax refund. Can already hear the masses screaming about how this is really just another tax loophole for the rich then.

And if this did somehow pass, I don't think anyone need worry about having to pay such taxes on their card collection. I would imagine the government would restrict any such "Mark to Market" taxes to only those investments/assets that have an easily discernible and universally accepted method in determing their year-end FMVs, like public traded stocks. The idea of otherwise having people be forced to get annual appraisals of their non-conventional assets/investments is sheer insanity.

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

BobC · #23 11-15-2021, 10:28 PM

Quote:

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

Good lord Peter, don't go giving anyone any more ideas!

LOL

buymycards · #24 11-16-2021, 11:28 AM

Quote:

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

Thanks for the stupid comment.

Leon · #25 11-16-2021, 11:31 AM

Quote:

Originally Posted by buymycards

Thanks for the stupid comment.

I thought it was spot on.
Taking money from someone who earned it and giving it to someone who didn't earn it, is just wrong.
.

glynparson · #26 11-16-2021, 03:19 PM

Quote:

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

Nonsensical Keith O b is about is far left as they come but has a kick ass collection. Love how Leon lets up this right wing political trash talk.

steve B · #27 11-17-2021, 12:31 PM

Quote:

Originally Posted by Peter_Spaeth

It would be easier for the woke left just to confiscate people's collections. Redistribute them. End of political commentary.

I can only hope I get generally better stuff.....

Like, ok take the 10,000 1981 Topps, give them to whoever. Maybe I get back a single nice card, maybe I get back a few hundred cards from a set where I might need a few.*

It would be like a huge nationwide hobby mystery trade!

* or with my usual luck a shoebox of P-F Smurfs and bald trolls.

BobC · #28 11-15-2021, 06:19 PM

Quote:

Originally Posted by darkhorse9

Not looking to delve into any political debates (please) but there currently is a proposal to make "Unrealized capital gains" taxable. That basically means that if you bought a card 20 years ago for $100 and it's current value is $5,000, you would be taxed on the $4,900 worth of value your item has today even if you don't sell it. You would be taxed just for having it.

This is for informational purposes only...not for political debate.

Taxes themselves are not a poltical debate. Remember the old adage - There are only two guaratees in life, death and taxes!

BobC · #29 11-15-2021, 06:08 PM

Quote:

Originally Posted by Fred

Are the polls taken on this board "anonymous"? If so, then polling responses would be interesting.

Thank you for the additional information.

I honestly don't know if the IRS could, or likely would, do this, but as Scott/Aquarian mentioned earlier, he has to keep the records of consignors sales available for quite a few years. So if some tax authority comes in asking for it, guess what, he's going to have to give them the info.

Now how do you think Leon (Hi Leon!) would like or appreciate it if one day an IRS agent shows up on his doorstep asking for names and contact info of people posting on here about not reporting and paying their taxes from cards they are selling? And yes, I know, you can make the poll anonymous, but there always seems to be a few people who will post on threads like that and go into the "what" and "why" they responded to the poll as they did. My warning is probably more so for them.

And even if we do the poll and people do come right out and say that they are in fact not reporting income and paying all their taxes, the chances of the IRS coming on here and following up to go after them is almost nil. But still, I liken posting that you're cheating on your taxes on a public forum to being a January 6 "capitol rioter" posting selfies of themself in Nancy Pelosi's office online. See where I'm going on this? Why take even an infinitisimally small chance on getting in trouble for something you don't have to do. I'm just playing Jiminy Crickett here, and trying to be helpful.

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