Selling coins at auction.

I have only bought slabbed coins at internet auction houses and now am going to sell some of them. The only question I have is about taxs. I live in Georgia and this state does not tax coins that I bought over the internet. The auction house is in California said they said they are not going to 1099 me, that is my responsibility. The words, "that is my responsibility" are what confused me because I know what a 1099 is and I know Georgia and the US Government do not tax the coins I bought.
Question: Do I have to report the coins I sell to Georgia and US IRS? I paid for the coins from my wages that were taxed. Thank You

 

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It depends on how much you paid for them and how much you sell them for. If you paid 10 bucks for a coin, and then sell it for 10,000,,, then Uncle Sam may take notice.

That said, I'd bet the farm that 99.9999% of collector coin sales do not realize a tax because most collectors get screwed on the buying price and end up selling the same coin for the same price they paid or less.... in the rare event that a collector sells a coin for more than he.she paid for it, it is usually only a small margin and not worth reporting.

I'd say your safe not reporting you future monitory loss to Georgia ; )

 

When they are telling you they will not 1099 you, they are saying they are not reporting the income to the IRS so it is up to you to account for the gain or loss on your own. It is illegal to make a gain on collectibles and not report the profit and pay taxes on it. You should check with your accountant on your specifics if you have questions.

I am just letting everyone know that the IRS has been known recently to subpoena auction house records and trace payments from the sale to individual tax returns. Since these payments can be known, if you do not report them the IRS can audit you on the matter.

If you have a loss or break even, I would highly encourage you to report it to the IRS that way there would not be questions in the future. What you wish to do with gains is upp to you, like a lot of the tax code.

Georgia law would basically mirror Fed law in most cases.

I am not saying what anyone should do, just explaining the consequences.

Chris

 

Isn't that what I said?

 

Read the rules for Schedule C or D. In effect a individual becomes a business when selling any collectibles. Or as advised consult a Tax professional.

 

You should really talk to your accountant/CPA for an authoritative answer.

If you choose to believe me: You are responsible for both federal income tax and GA state income tax on any profits above your purchase price. The fact the money you used to purchase the coin was already taxed does not factor into the equation in any way, shape, or form.

 

What happens if your coin/s have been passed down to you with no known purchase price and they are sold
for $10,000.00? I would think your gain would be $10,000.00 and that's what goes on line 1 Long term capitol gains
on Schedule D along with coin description and date of sale.

 

Your basis, ("cost"), is what the value of the coin is when you inherited it. This is why it pays to document value when you receive something passed down.

 

I have a few coins that were passed down (at no cost) to me. If they were part of an inheritance, you can use their value — at the time you received them — as their basis cost.

Keep records. If you don't have any, jot down what coins you have, who you purchased them from and what you paid for them. While the IRS may not accept that today, in 10+ years, you will have shown that you had the described coins as of today and that you can show a basis value for them (say using the Red Book).

Finally, you owe taxes only on the net gain of all your numismatic transactions for that particular year. If you sell your 1909S-VDB that cost you $600 for $1,000, your taxable amount is $400. I actually knew someone who sold a 5 figure coin for a slight loss so that she wouldn't have to pay taxes on the sale.

 

I have discussed this subject with an accountant in the past and what he told me is that if you sell stuff at auction as an ongoing business that the IRS expects you to report it. If you're selling a few hierlooms here and there no, they're not interested.

 

This is why many people sell at coin shows on a cash basis. No paper trail.

 

I spoke with someone who use to work for the IRS and they said that they closed an old case vs. a major oil company that owed over 100M in taxes in the year 93,, btw, the taxes were due in 74.... and the company settled at 5M (roughly 20 years later). I wonder if the those oil boys worry around $50 earned on a coin they sold at auction ?,, and I wonder why the IRS spends time worrying about the same thing.... bigger fish out there.

 

Well those oil companies had a ton of CPAs and attorneys to fight the IRS. What do you have? Btw frequently there are true issues of law and applicability of taxes with corporations, I am not trying to say that they just got off light because they had attorneys. Just because the IRS thought they owed XX does not mean the company agreed.

Anyway, the procedure used is to simply subpoena the auction records and create a file of any total sales above a certain amount. Then they simply send letter audits to you if they do not see where you declared the income from the auction. If their cutoff is $1000 they will send a letter audit if you sold $1300 worth of coins at that auction.

Chris

 

... a bottle opener... a 12 pack... and my 2 front teeth. What else does a man need ?:devil:

The "big oil" case was described to me as a slam dunk... however, the topic of the conversation was not specific to this example, it was a discussion of how the IRS worked at the time my friend was there.
It was described to me as essentially 3 tier.
1 - the body that audited and passed violations to the 2nd group
2 - the body that decided whether or not to litigate a case (actuarials, and business case folks)
3 - the legal body that brought charges and went after folks.

.... the conversation was specific to bodies 1 and 2, and how the #1 often resented the #2 because of thier tendency to settle rather than pass a case to #3.... which is where the example came in (it was one of the very cases that they had ever observed that actually went to #3),, so yes, in order for a case this size to go to #3 you can bet you lefty that the there was a clear and provable violation for the amount specified... the kicker was that they still settled. I guess if you have the legal staff, you can pretty much do anything you want to do in the good ol' usa...

Doug makes a good point, a .43 cent stamp carrying the scary IRS seal mailed out to a boat load of little fish is probably the best business case going for the IRS to quickly net a bunch of fish and easy cash. Sure beats fighting the same big fish for your entire career only to watch them throw the hook a year or so before you retire.

 

I'm sure dealers report every profit....

 

Relax. Most of us don't have gains to worry about.

If you have, then GA doesn't care. The Feds do. You are legally obligated to report it. It may or may not make a bit of difference to the bottom line. Depends on income, deductibles, taxable adjusted income, etc.

Maybe you don't have an accountant. You do your taxes and H&R. My advice it to be straight about any big gains. And not sweat the little stuff.

FWIW, last I heard -- and maybe I heard wrong (have't looked it up), is you cannot wrote off gains and losses for this hobby. But that's probably not a matter to you.

You're cool for just asking about this. Almost no one even thinks to report small gains. But if you made a lot of money, then do the right thing and report it.
Lance.