tax consequences of coin collecting?

Taxes and Coins

I have pre-paid legal--they offer wills free as part of their basic membership--$40 or so a month, hours of free legal consultation.

On the tax front it is true that the IRS sometimes pays the 15% finder's fee--but only if you provide really damning evidence that is key to their cracking the case. I would turn in tax protestors to the IRS--those who are encouraging others to engage in blatantly criminal behavior--it is best that tax fraud is caught early, otherwise interest and penalties on the tax debt start mushrooming if left for a few years. By law certain crimes must be reported.

There are numerous cases of unreported income, say, in cases of cracking coins out and upgrading them; finds at coin shows where a rare type colonial is discovered and where tens of thousands of dollars are made without the IRS knowing basis. Audits should be a lot more common, and many have predicted that taxes will be jacked up on gold, coins and collectables. It is absolutely unreal how gold is being so heavily promoted on conservative cable shows. They must be selling quite a bit.

 

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Thanks for the help.

I have no heirs. I have 3 cousins, who are not at the top of the 'list' for my inheritance. The people I'd like to include are no relation to me. I don't think I need life insurance, I am not a liability to anyone.
What I don't want, is the State handling my assets.

I spoke with my attorney today, he was very candid, and kind.
I told him I could not afford the fee, and, in his opinion, what would be wrong with the LegalZoom route.
He told me that it would be fine, if it is executed precisely, by have 2 witnesses and a notary all in each other's presence while I sign it. As long as somebody knows that my Will exists, then it should be legal and binding.

The only thing that I do not know if I can accomplish on LegalZoom is the division of the collection. I want it's value to be split among the 2 non profit orgs. I do not want to mention specific items, but rather the percentage of the value of the collection each receives. And give them the option of keeping the collection items. Not sure how I can get this done.

I wish I could use the 'gifting' thing. I just don't think it is right for me, as I will not be doing anything with this collection (except hopefully using some for retirement).

 

This sounds like a good legal plan to me. TC

 

They also know I collect guns....
Just sayin'

P.S. I'm a newbie here...hello everyone.

 

Hello,

Please introduce yourself in the Intro section.

 

JustCarl,
You mention that you only use cash to buy coins. (no paper trail) Lets say for the sake of this talk that you have bought thousands of coins over the span of 40 years egualling 100,000 dollars in value. Lets say that you spent 50,000 to buy them and they have gone up in value 100%. Ok now at this point you sell the collection for 100k netting you 50K, you would be expected to pay 28% (collectibles tax) on your gains (50K).
Ok now lets say that you didnt claim the taxes on the amount you made over the 40 years, and the IRS audited you. Since you do not have a paper trail, and lets say you have no reciepts, I was under the impression that the IRS would assume a cost basis of 100% of the total sales, and at 28% collectible tax you would owe $28,000. Instead of $14,000.

CT- what do you think?

Also would it be an option to start your own coin corporation and give the coins to the corporation as "cash/property from investors" as start up income and or inventory, then when it comes to the selling of coins you would be charged corporate tax compared to capital gains tax?

Are there any CT members who are CPA's or accountants?

Any info will help

 

....hence the phrase, "no paper trail". If there is no trail, there is no way the IRS will know of this 50K profit. They may be sneaky, but so far I'm pretty confident they don't cameras installed in our eye sockets yet.
Guy~

 

That's a good point guy, but what do tell them when they ask where the 100k bank deposit came from?

 

Don't deposit it I guess. If someone is buying coins with cash I would assume they keep a small cash reserve at home. Put it there.
Guy~

 

That's right, keep that stash in the mattress.......:smile

or



Saftey deposit box. :smile

 

Don't spend it either because if the IRS does audit you they are pretty good at looking at your spending habits and back calculating what your income was and if your spending doesn't match your claimed income they will have plenty of questions about the discrepancy.

 

I know you'd get taxed on the sale of coins, but why couldn't an inheritance be based on the face value vs the numismatic value of the coins passed on?

 

I wrote a big long post on this and guess I got timed out cause its gone and would not let me post it.

Bottom line:

For 2010 there is NOT an estate tax (yet). If Congress does not act the 2001 rates will return in 2011, which are a $1 million exemption (the estate will not owe tax if the value is $1 million or less), anything over $1 million is taxed at 55%.

In contrast, in 2009, the exemption was $3.5 million and 45% rate over $3.5 million. Double that for a couple.

This is a political hot potato and some change is likely soon.

As to avoiding the tax, spend it, squander it, or give it away tax free at $13,000/year per person. A person and their spouse can give $26,000 each year to a person. If you include the son in law or daughter in law you get a total of $52,000/year without tax every year, and if you need to give more there are the grandchildren. There are legal ways to avoid or limit the tax. If you have significant assets or want your coin collection to go to a particular person hire a lawyer to make sure you have taken every step you can to protect yourself.

And do not rely upon CT for legal advice or estate planning. Hire a professional.

 

I will never be able to sell my collection without having to pay a large hunk of it to the IRS and thats with having an invoice on most but not all of the coins.
I would give away more than the profit in taxes on something I have worked on for over 40 years. Sure I could try to hide it but that's not legal or easy for me.

If I just give it to my son, he will have the same problem if he sells it.

If I give it to my son by "way of will", he will own it at market value as of the day I died. He could sell it and pay no taxes. That's my plan but get your own lawyer.

 

Taxes and Coins

There are professionals and then there are the real experts.

I went into the IRS office a couple of times on this issue, the Homeland Security was there because of the recent attack.

They did not have the answer, I was referred to the call center--I called several numbers and was told by the IRS expert it would be taxed like regular property, my rate is under 20%. I gave my records to a franchise preparer and had him do it. I know ICTA has a different take on this.

There are various kinds of audits. There is the cost of living audit; the forensic audit, in criminal cases like this one: http://www.justice.gov/usao/ct/Press2010/20100311-4.html
Because of the nature of the case the IRS went through many years of back records. Unless there is something criminal in the case or a substantial amount of unreported income, it is unlikely you will fall afoul of the law. But if you choose a bad preparer who later gets in trouble with the IRS, they could go back years and dig up your returns with all the trouble that comes with that. Taxes are a cause of endless contention, try to avoid such trouble.

The $100 bills and others apparently have an encodable strip, that could be tracked but usually isn't. Dan Pilla, Jr. the tax expert, who has a website, Taxhelponline, has written about this issue.

It is important to file the necessary paperwork. They aren't that smart unless you are a target of theirs. Don't become one by being a non-filer, a tax protestor or by having transactions that draw attention to yourself.

 

I hope so. I got one son - who is ANNOYED when I show him my expensive coins. But he's getting them, it's part of my plan to get back at him!!!!

Seriously, I hope you're right. I don't have receipts, etc. Just a mish-mash of my coin collecting addiction.

 

Talk about things NOT TO DO. I suppose when you went to that office you gave your name, address, etc. And then you called? Ever hear of Caller ID?
WOW! If you now get audited, try figuring out why.

 

Hate to drag out a post and beat it to death too. To start with, I never sell coins and never will, hopefully. I've been collecting for well over 60 years and have not the faintest idea of how much has been spent on coins over that period of time. And that would have to include folders, Albums, plastic rolls and on and on and on with STUFF. When and if I pass away, hate to say die at my age, I will NOT come back and tell the IRS or any government agency about my STUFF. So I owe nothing and if they want to dig me up and sue me, so be it. I'll rot all over the witness stand.
And as to incorporating yourself. WHY? This is supposed to be a hobby. FUN.
And as to this $10,000 to be given to a relative and they will not have to pay taxes on that. I've never met a relative I'd give a fraction of that to. My Son of course has already outdid that with all that college costs. And none of that is tax deductable either.

 

States may differ, but in most that have estate taxes/fees, the law says the bank boxes will be sealed if anyone on the box list dies until the probate judge has ruled on the acceptance of an executor of their will. This can be a real problem for those who draft their own wills and don't record them at the county recorder and just puts them in their safety deposit box. Ask your bank manager how they act on this.

 

As I said I really hate to drag this one out BUT, just how does the banks find out who is dead? For some reason people think the government, banks, savings and loans, etc have a staff of people sitting around trying to find out who is and who isn't dead. Why every one knows every bank has a person that sits and reads the obit columns and then compares with all their records to see if any of them are or were customers. This is completely illogical. It's only if someone tells the bank to freeze an account they could know about a death in the family if that was the reason. I know for a fact where I live the only way a safe deposit box is conficated is due to lack of payment for that rental. If someone continues to pay for a box, it could stay as is for the next ten thousand years for all the bank cares.
And unless the IRS, CIA, FBI, etc. have your house bugged to find out who died, NO ONE really cares. And note too, that in almost any state, if you or your family do not notify the newsmedia of a death, there will be nothing in the obits about it. No newsmedia has a person on staff just trying to find out who is and who isn't dead yet. And the dead sure will not notify them.