Coin Sale IRS reporting?

As for reporting people it is going to be very hard for most people to substantiate the evidence with records unless you had big dealings with them. Look at their report form that goes to CA, they want evidence not hearsay. And the idea the IRS is as tough as they were in the 1980s etc. is just ludicrous, their cutbacks have been huge and last I heard their computer systems were very backward with Fortran and Cobol in some of them! The shysters sent me a whopping bill around tax time this year, they were dead wrong, I knew they were dead wrong and ended up paying nothing of the bill through HRBlock filings.

 

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Re-read your post.

I said: "You cannot deduct hobby losses".

And you still can't.

You CAN deduct expenses related to that income, to the extent of the income but not to create a loss.

I don't have to quote the regs, you did it for me.

 

As you quoted:

Expenses up to the amount of income, but: only up to the amount of income and cannot be used to offset other income.

 

Everything you stated is correct, expenses may be used against income, but only to the extent of income and MAY NOT be used to create a loss.

 

If you want a real reward turn in a hedge fund manager or bankster!

 

No, they are always able to use legal schemes and shelters and if caught have expensive lawyers to bail them out.

Coin dealers have become a target from time to time, and some of them deserve it especially the ones who pay chicken feed and sell at whopping profits, but most of them will not get caught, just too sharp....

 

I suppose that I am interpreting it incorrectly then.

If I had 1 coin that I bought for $1k and I eventually sold it for $500.00 then I have lost $500.00 on that transaction. According to you (if I understand you correctly), I can not deduct that hobby loss against any income (which in this example would be $500.00 or the same amount that I lost).

Now if I had bought a 4 course meal and 20 bottles of wine for everyone at the table - then I can deduct that.

That sounds about right for the IRS, so I no longer disagree.

 

First:
"According to you (if I understand you correctly), I can not deduct that hobby loss against any income (which in this example would be $500.00 or the same amount that I lost)."

Correct.

Then:
"Now if I had bought a 4 course meal and 20 bottles of wine for everyone at the table - then I can deduct that. "

Only if you had a valid business purpose.
If you had a Business it would be deductible on Schedule C, or on a corporate return, to the extent of 50%. If properly supported.
If an employee, and unreimbursed, the 50% less 2% of your AGI.

 

Actually, yes you can. If you characterize your purchase as an investment, then you can take capital gains and capital losses. You are allowed to offset $3k of losses each year (and you can carry any loss larger than that forward into next year). This loss will first offset any capital gains, and then your ordinary income. For more information, see the IRS website here: http://www.irs.gov/taxtopics/tc409.html

*I am not a tax professional. Any opinions here are based on my understanding, and I cannot be held responsible for any decisions you make based on the content of my post.*

 

You can characterize it the way you want, but if the IRS decides its not an investment but your hobby, you cannot. Yes, if its an "investment", there are different rules. However, most coin collectors would be overruled if they tried to claim their hobby is an investment. If you coin collection are only bullion AGE's, then you could use capital gain rules most likely. If you collect morgan dollars by date and mm its a hobby. Capital gains are more for real investments, like stocks, bonds, land, rental property, etc. You know, stuff people DON'T go to shows for, spend time for fun looking at, etc.

 

or spend time on web sites like this one.

 

You may be able to get away with not reporting profits from cash sales. But if you get audited, the IRS has sophisticated ways of finding out if you hid income. Then you will be lucky if you just get off with interest and penalties.

 

Since the basic point you make is a good one, I hate to quibble over terminology, but in the industry, "tax avoidance" is used to refer to legal methods of reducing the tax owed; "tax evasion" is used to refer to illegal methods, like not reporting income.

 

As a rule, you can not deduct hobby loses [anymore than you could deduct the "loss" when you sell a personal use car], but you can in effect take a loss with a little tax planing. If you have a coin with a $1000 loss, and another coin with a gain over $1000, and bundle them together in one sale, you only pay tax on the net gain, so in effect you are able to deduct the $1000 loss.

 

Bundling is not necessary

timing is necessary

 

People can claim whatever they want and can find accountants to do the filing for them; the question will be whether the IRS will call you on it within the three years they have to challenge your return. It the case of "evasion" of a significant percentage, there is apparently do statute of limitations.

 

Thought those boys had 7 years to call you out.......

 

Well if you amend your returns and end up paying a lot more you will only get credit for the three last years for SS paid in.

 

They can go back forever for criminal tax evasion. Normally they wouldn't unless something in the last seven years tips them off to it, and you had been doing it longer.