Would you take this deal?

[BobC]

I'm not a tax expert and I don't play one on TV, but do you have a monster box of Gregg Jefferies rookies, or some other collectibles you could sell at a big loss, to offset this transaction? Would that work?


Sorry Mark, nice try though. LOL

If you are a collector, selling your collectibles, you cannot deduct any losses from the sale of one against the gains from another.

Now, and I've said this on the forum before as well, if you can prove to the IRS somehow that you were not a collector, and that you actually bought your card(s) strictly as investments, then you can offset the losses against other gains, and potentially against other income as well. And if you could do that, convince the IRS you card(s) were not collectibles and were only investments, your federal long-term capital gains tax rate would be maxed at 20%, not the 28% it is for collectibles.

The problem is that the IRS has historically viewed and defined sports cards pretty much all as just collectibles. It is only most recently that sports cards are starting to look more like a possible type of investment after all. Trick is how to then convince the IRS to agree with that assessment for cards you bought strictly as investments. It will probably take someone willing to go to court with the IRS, and winning their case, for that to happen. And unless we are talking about a T206 Wagner, or some other cards in the six to seven figures, and up, range, I can't see anyone willing to spend the time and money to fight the IRS in court to prove that sports cards can also be investments as well for tax purposes. But I can see someone eventually trying to fight the IRS on this down the road.

[RCMcKenzie]

Thanks for the info, Bob. My accountant has always advised me to never sell, it's too complicated. In your scenario, I have zero interest in trading baseball cards. I thought it would be a tax free exchange, with a deferred tax due.

[BobC]

Originally Posted by RCMcKenzie

Thanks for the info, Bob. My accountant has always advised me to never sell, it's too complicated. In your scenario, I have zero interest in trading baseball cards. I thought it would be a tax free exchange, with a deferred tax due.

Nic mentioned this earlier, when the new tax law overhaul and changes from 2018 went into effect, they also amended Section 1031 of the Internal Revenue Code, which dealt with Like-Kind Exchanges. After the amendment to that section of the tax code, the only thing you can exchange/trade with potentially no current tax consequences is real estate (land and buildings). That is it now.

And your accountant sounds like he/she is no dummy. Let me guess, you probably don't have perfect records that show everything you ever paid for all the items in your collection, right? And you may have hundreds (or even thousands) of cards as well. If you go to sell off a big chunk of your collection, your accountant ends up potentially having to list and report every single card you sell as a separate taxable transaction on your tax return. That is if you are a collector or investor. If you're a dealer, it is actually a little easier in that you only have to report your sales in total, but the tax consequences can be even worse because now you're talking ordinary income, not capital gains, and you can be subject to self-employment taxes (social security and Medicare) on top of your income taxes as well if you're a dealer. Fun, fun, fun!

[jethrod3]

Given all that I've heard, I would keep the card, along with the satisfaction that I owned the best of its kind!! We are our stories, and that, and your offer, is one great story that can be told at numerous cocktail parties!

[Michael B]

After giving Bob a timeout for a double post I have a question that is more about aesthetics.

You state that you are a registry fool. I would guess that PSA's registry actually means something to you. If that is the case, my question would be: How would you feel knowing that the best card in that grade of a set I guess you collect is no longer owned by you and you only own the second best card? Or better yet - What on God's green earth are you thinking????

Why would you give up the best card in your collection for a few dollars if you do not need the money?

I read your post before anyone else answered and these were my first thoughts.

[BobC]

Originally Posted by Michael B

After giving Bob a timeout for a double post I have a question that is more about aesthetics.

You state that you are a registry fool. I would guess that PSA's registry actually means something to you. If that is the case, my question would be: How would you feel knowing that the best card in that grade of a set I guess you collect is no longer owned by you and you only own the second best card? Or better yet - What on God's green earth are you thinking????

Why would you give up the best card in your collection for a few dollars if you do not need the money?

I read your post before anyone else answered and these were my first thoughts.

Exact same thing I was thinking as well when I mentioned why would you want to trade down on your card, but really get nothing in return but an increased tax basis? He already said he wasn't going to be selling this card anytime soon, so you're absolutely right, it seems like a dumb thing to do as a collector, Registry or no Registry even.

And the double posts just happen. I only click the submit button once, but occasionally it double, or even triple posts. No idea why, but have seen it happen to others on here as well.

[RCMcKenzie]

Thanks, Bob. I feel like you should send me a bill for consulting. I don't do much selling or trading, but lots of buying. They used to have something called a casual sale. I actually have pretty good records on my cards.

[RCMcKenzie]

On a similar topic to Nic's.

A board member is working on a mid-tier hofer back run. He reaches out to me to see if I have a dupe of a rare card from T213-2 Coupon. I do. I paid $90 12 years ago from a BIN from Joe's Vintage. It has a sticker on the back that states "90-" in Joe's handwriting. SGC 10 with paper loss on front.

He offered a raw T213-3 common with front and back damage. I am thinking about it, and asked him to to throw in a low grade common t206. I haven't heard back. Should I forget about it?

[atx840]

Originally Posted by RCMcKenzie

I haven't heard back. Should I forget about it?

Rob, I wouldn't forget about it, they might have been traveling for work and then stuck on bed rest for a few days

[Touch'EmAll]

You have to consider eye appeal of the 2 cards in question, especially centering, and of course color, focus, print blips, tilt cut, etc.

If the card you currently have is better eye appeal - absolutely keep what you have.

[BobC]

Originally Posted by RCMcKenzie

On a similar topic to Nic's.

A board member is working on a mid-tier hofer back run. He reaches out to me to see if I have a dupe of a rare card from T213-2 Coupon. I do. I paid $90 12 years ago from a BIN from Joe's Vintage. It has a sticker on the back that states "90-" in Joe's handwriting. SGC 10 with paper loss on front.

He offered a raw T213-3 common with front and back damage. I am thinking about it, and asked him to to throw in a low grade common t206. I haven't heard back. Should I forget about it?

No, I wouldn't forget about doing such a trade, assuming you are happy to get the two cards you're trading for. The only thing is, you technically end up owing income tax on the difference between the $90 you originally paid for the T213-2 Coupon card you're now trading away, and whatever the then current FMV is of the T213-3 and T206 cards you traded for, as of the date you made the trade.

Just remember to keep track of/a record of the trade so you know what your tax basis going forward is for the two cards you just traded for. It should be the FMV of both cards at the time of the trade you then use to figure out how much in sales proceeds you'll be reporting on your tax return from the deemed sale of the T213-2 card you just traded away.

[Exhibitman]

Originally Posted by BobC

assuming you are happy to get the two cards you're trading for.

Yep, thats the bottom line: does it make you happy? This is supposed to be fun. A card collection is:

"a magic carpet that takes you away from work-a-day cares to havens of relaxing quietude where you can relive the pleasures and adventures of a past day—brought to life in vivid picture and prose." --Jefferson Burdick.

[BobC]

Originally Posted by RCMcKenzie

Thanks, Bob. I feel like you should send me a bill for consulting. I don't do much selling or trading, but lots of buying. They used to have something called a casual sale. I actually have pretty good records on my cards.

LOL

Don't worry, no bill is coming.

And the concept of casual sales still exists, but as I would try to explain it to clients, think of a casual sale as like a garage sale to clear stuff out of the house. You don't continuously do it all the time, so you aren't a dealer in a trade or business. And you're usually just selling your old used clothing, furniture and other junk that you originally paid a lot more for. In which case you are basically selling everything for a loss anyway, so why waste yours and the IRS's time by having to go through the trouble of reporting it all on your tax return when nothing will ever be owed? But now you're talking collectibles that aren't just used personal items that depreciate in value over time. Plus, with the way card prices are today, the values and amounts are no longer insignificant. And couple all that with people using online venues and platforms to sell a lot of their stuff nowadays, like Etsy, Ebay, Comc, etc. These are all initially assumed by the IRS, and many others, as more like dealers in business who use the online services to sell their stuff. Think of it this way. With that new lowered reporting standard that went into effect, starting this year, anyone selling $600+ worth of stuff on Ebay is going to get a 1099-K form reporting their total sales for the year of $600 or more, and a copy will be sent to the IRS as well. Now maybe you only used Ebay for a couple "casual sales" and only sold two or three cards this whole year, for a total of say $800 in sales. When the IRS gets that 1099-K form next January with your name on it, showing you had $800 in sales to report, want to bet if the IRS assumes you are a dealer or a collector selling collectibles? They are going to initially assume you are a dealer, unless you properly file your tax return and accurately report at least the total of those $800 in sales shown on your 1099-K form as gross receipts from individual collectibles sold.

So with the advent of online and other related types of sales and sales venues, the idea of "casual Sales" has been altered a little in the way it is viewed nowadays.

And keep up with the records. And if/when the time comes to have to report things on your tax return, estimate the tax basis of some cards if you have to. Just do the best you can. The IRS can, and does, work with people more than you may think when it is difficult to find every single record or receipt.

[BobC]

Thanks Bob. I'm not in that situation, but I would've thought what I proposed would've been OK to do, and not a "trick." I appreciate your clarification. I do agree with you that when it comes to the IRS, it's best to play by the rules and sleep well at night.


Very true Mark, very true.

The real trick is to make sure you get everything onto your tax return that the IRS knows about and has record of (W-2s, 1099s, etc.), and to then make sure you have everything reported in the right place, on the right forms, nothing is missing, and all the numbers add up properly (ie: you didn't screw up the math). When you electronically file your return, no person at the IRS actually looks at it. It goes into their automated system and is processed by their computers. It will automatically check for missing items, bad math, missing forms, and so on, and if it finds something is off, will generate a letter/notice to you about what they found wrong. So you want your return to be able to go through the IRS's computer checking system without a glitch. It is usually better to use a tax software program to do your return (if not an accountant/tax preparer) as the software typically makes sure the math is good, and usually alerts you to missing od otherwise deficient things on your tax return. It also then usually lets you electronically file your return so it goes right into their system, untouched by human hands. LOL

It is when you prepare your return and paper file it, actually mail your return into the IRS, that a human has to go ahead and enter everything into the IRS's system for you. Obviously, you now have a human looking at your tax return, and they can possibly make a mistake in entering it into the IRS's computer system for you. Don't worry though, these aren't going to be actual tax auditors entering your paper filed returns into the IRS's system, but still, the more hands that have to touch your return, the more chances for errors.

[Michael B]

Originally Posted by BobC

Exact same thing I was thinking as well when I mentioned why would you want to trade down on your card, but really get nothing in return but an increased tax basis? He already said he wasn't going to be selling this card anytime soon, so you're absolutely right, it seems like a dumb thing to do as a collector, Registry or no Registry even.

And the double posts just happen. I only click the submit button once, but occasionally it double, or even triple posts. No idea why, but have seen it happen to others on here as well.

I was thinking that it must be some quirk in the system, possibly the isp.

[BobC]

Originally Posted by Michael B

I was thinking that it must be some quirk in the system, possibly the isp.

Yeah, Leon said something like that to me once. Saw that was happening to him also.

[ALBB]

Nic,
good luck with decision

But it would be much more fun/ interesting/ easier ..for guys reading this if you could say -

For Ex - Im giving up my 33 G Nap Lajoie...for a 52 T Mantle and $150,000

[bnorth]

If it was just a simple trade with cash yes. With all the added BS involved not a chance.

[raulus]

Originally Posted by ALBB

Nic,
good luck with decision

But it would be much more fun/ interesting/ easier ..for guys reading this if you could say -

For Ex - Im giving up my 33 G Nap Lajoie...for a 52 T Mantle and $150,000

Totally understand and agree.

Part of the fun is that I'm trying to keep some of the details obscure to protect the innocent.

Another part of the fun is that I had hoped that each of you could personalize it a bit by thinking of your own crown jewels and whether you would trade them down in exchange for some cash. As you note, leaving it this mysterious in some ways detracts from the exercise, because by not knowing the precise cards and details, it seems less real, and perhaps more difficult to really conceptualize.

[Mark17]

Originally Posted by BobC

If you are a collector, selling your collectibles, you cannot deduct any losses from the sale of one against the gains from another.

Bob,
Suppose I trade you a green T206 Cobb and a monster box of 1988 Fleer Jefferies. I paid $3,000 for the Cobb and $25,000 for the Jefferies. My total cost basis is $28,000.

I receive from you a lower grade green Cobb, current market value $18,000, plus $10,000 cash. From a tax perspective, isn't that a break-even deal for me?

[BobC]

Originally Posted by Mark17

Bob,
Suppose I trade you a green T206 Cobb and a monster box of 1988 Fleer Jefferies. I paid $3,000 for the Cobb and $25,000 for the Jefferies. My total cost basis is $28,000.

I receive from you a lower grade green Cobb, current market value $18,000, plus $10,000 cash. From a tax perspective, isn't that a break-even deal for me?

Mark,

I see what you're trying to do, hopefully bundle a couple items together as one combined tax basis to take advantage of the taxable loss on part of what you are looking to trade. Technically, the IRS would still view the Cobb and Jeffries cards as separate collectibles items, which should then be reported on your tax return as separate sales, even though you traded them both together for something else. You'd end up allocating the sales price, which would be the current FMV of the card(s) you traded for, based on the then current FMV of the items you are trading. Or at least that is what you should be doing.

Now if you were to try listing the Cobb and Jeffries cards together as though they were just one item being sold on your tax return, say you called it "sports card collection" as the item being sold, and listed the tax basis as the $28K in your example, you might be able to get away with it if the IRS doesn't come calling for clarification on what is in the card collection? You basically end up playing what is commonly referred to in the tax world as the IRS "audit lottery". You file a knowingly false return, and pray you don't get caught/picked and audited by the IRS. I would never recommend or advise anyone to be doing that. But I also know that many, many people do just that kind of thing on their tax returns all the time.

[Mark17]

Originally Posted by BobC

Mark,

I see what you're trying to do, hopefully bundle a couple items together as one combined tax basis to take advantage of the taxable loss on part of what you are looking to trade. Technically, the IRS would still view the Cobb and Jeffries cards as separate collectibles items, which should then be reported on your tax return as separate sales, even though you traded them both together for something else. You'd end up allocating the sales price, which would be the current FMV of the card(s) you traded for, based on the then current FMV of the items you are trading. Or at least that is what you should be doing.

Now if you were to try listing the Cobb and Jeffries cards together as though they were just one item being sold on your tax return, say you called it "sports card collection" as the item being sold, and listed the tax basis as the $28K in your example, you might be able to get away with it if the IRS doesn't come calling for clarification on that is in the card collection? You basically end up playing what is commonly referred to in the tax world as the IRS "audit lottery". You file a knowingly false return, and pray you don't get caught/picked and audited by the IRS. I would never recommend or advise anyone to be doing that. But I also know that many, many people do just that kind of thing on their tax returns all the time.

Thanks Bob. I'm not in that situation, but I would've thought what I proposed would've been OK to do, and not a "trick." I appreciate your clarification. I do agree with you that when it comes to the IRS, it's best to play by the rules and sleep well at night.