IRS & Your Coins

My thoughts

Dave,
If you by a coin from a dealer for $600 or more you should save your recipt in order to keep track of your basis, should you ever sell that coin. If you sell a coin to a dealer for $600 or more, the dealer would issue you a 1099. My thoughts on how you would report that would be as a capital gain (cost less basis) & not earned income. Most people like you and I are collecting coins as investment. I don't believe that you VA disability is effected by investment income. This advice comes directly from a Senior IRS Collections officer.

Steve

 

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I agree that the VA disability pension should not be affected in any way. But if you trade enough to be considered doing "business" it might affect your Social Security Disability payments. Obviously, if you can be in business, they would no longer consider you disabled. This could get dicey for sure. I know of one person whose benefits were halted after receiving a W-2 for a part time Xmas season job. Seriously, though, if people are able to work or conduct business they really aren't disabled and probably should not be getting benefits as if they were. IMHO

 

Just to clarify for others :

Long term capital gains on collectibles are taxed at a flat 28 % , short term gains are taxed at your ordinary income rates. The IRS really nails people here.

 

Mark,
My Tax collecting wife is at a party. As soon as she comes back Ill get you a answer.

Steve

 

Information is on the internet , just search collectibles and capital gains .
Totally different then regular cap gain when you sell stocks .

 

I wonder at what point the IRS considers it as capital gains and when the trades are enough to constitute business income ? There must be some rules like home or auto trades ? And if you can declare it as profit from a business, aren't there a greater number of deductions associated with it ?

Curious is all.

 

I was an accountant for 20 plus years. I am happy I got out of it 11 years ago

 

On my way to scope it out. Remember shes from the zombie squad. The rules and only the rules mean anything. I would love to snag her being wrong, doesnt happen much around here. LOL

Steve

 

GDJMSP;
She said it was the capital gains tax that would be imposed as the coins were looked at as an investment, and it reads that the number for that is 28%, as you said GDMSP, so thats 28% which means if Im following this right the wise move is of course to sell coins flat out as a dealer and pay the standard rate. Im just as concerned about all the 1099"s that would have to be issued. Or not, thats the part I really dont understand, I know when she gets back she we take the strictest view when it comes to reporting.

Steve

 

Ok. Im reading and learning...

Steve

 

If you are a dealer then you use Schedule C for business income . In order to be considered a dealer you would have to meet strict IRS guidelines.

 

Other than possibly more deductions, there is no tax rate advantage to being a dealer. The gains from coin sales are taxed at a maximum 28%, thus, if your income tax rate is lower, you'd be taxed at the lower rate. A disadvantage or advantage, depending on your circumstances, to being a dealer is your profit is subject to SE tax.

As far as whether or not you're a dealer, the IRS would look at many factors, not just level of sales. Think about the difference between how an investor/collector would buy/sell and how an operating business would behave and chances are the IRS would look to see if your activities resemble one or the other to determine your status.

If you are a dealer, other considerations based on your level of activity would be the passive activity and hobby loss rules.

 

If you are a dealer you file a schedule C for business income. The 28 % rate is for Capital gains on collectibles. As a dealer you are taxed based on your income .

 

Congress doesn't make the rules they make the laws. The Exexcutive Branch agency charged with the responsibility of enforcing the law as perscribed in the legislation is responsible for developing the rules.