If you are asking about income taxes, the sale price less the cost of acquisition would be considered "income", which would be considered along with the seller's other income in setting the tax rate. If the seller is in the business of buying/selling coins, the sale price would add to gross income, subject to all the business deductions the seller might be entitled to. The dollar amount of the tax would also be affected - often substantially - by whether or not the seller is subject to the Alternate Minimum Tax (an invention of Satan :hammer: )
all taxes lets say the sale of a coin is $10,000 at a Heritage Auction... how much is one truly receiving back after commission, and all taxes
If you are not a dealer, my understanding is that the profit is charged at a special 28% rate for collectibles. Of course, you will also owe state tax depending on where you live. Since I am not a tax expert or qualified to offer advice, please consider this to just be a friendly warning that you had better consult your tax advisor.
Basically then the net would be as follows I am not a Dealer..so here is what I figured out. Tell me if it is even close once I place a coin on the auction block. Most Auctions charge a 15% premium correct? 15% Premium + 28% Federal Tax + 7% State Tax a whopping 50% net on a sale of a coin????
The 15% premium is what the buyer pays, seller's commision is a little less. At Heritage, Seller's commision is 10%.
The Federal and State tax is only due on the profit. Thus if you bought a coin for $50 and sold for $100. You would only owe the federal and state income tax on the $50 profit.
Profit - $50.00 True, but if one inherited the coin then would the profit be 100%, and 100% would be taxed?
Inherited items get a stepped up tax basis to fair market value on the date of death, or an alternative date specified in the Internal Revenue Code. That's why taxwise it is far better to inherit than to receive a gift, since the basis of a gift is its value at the time the donor acquired it.
Correct: if an estate rerurn is filed, you would get the stepped up basis (ie cost) as of the date of death or 6 months thereafter, your choice for value when you file the estate return. As for the taxes, it would depend upon the holding period. Short term taxes are at normal rate, for your return, and long term are at a maximum of 20% (Federal) plus your particular state's rate (NYS maximum is 7.875%). Aside: there is no sales tax charged to the seller at an auction. The sales tax is paid by the buyer, if there is any. The same as with a car, you don't pay sales tax when you sell it (either to a car dealer or privately) if you sell the car privately, the new owner would register the car and pay any sales tax on the purchase.
Few people pay Heritage the 10% commission. In many cases the consignor gets more than the hammer price. Example, the coin hammers for $10,000. The Buyer actually pays $11,500 (15% buyers fee is tacked on to the hammer price). The seller likely gets somewhere between $10,000-$10,700 for the coin.
I forgot, any expenses of the sale are added to your cost basis, this is: say you pay $15 to send the coin to the auction house (for registered mail, and insurance) and they charge you 10% on a $1,000 sale, then you would add the $15 (mailing) plus the $100 (10% commission) to your cost and then determine the profit (add your cost.) The adjusted profit would be taxed either at ordinary income (short term holding) or capital gains rate (20%= long term gain). Realize though, unless you regularly engage in the sale of coins for profit, or investment, that any losses would probably be lost to you, as hobby losses. Note: I emphasize, 'probably', ask your tax advisor for a definitive answer for your particular situation. Also, realize that your state's income tax would be deductible if you itemize your deductions, so actual effective rates can and do vary.
