tax question for coin collections

Howdy folks,

I asked this down below in another thread, but really am curious.

I know that buying and selling a coin is potentially a taxable event. The IRS feels that if you make a gain on the sale of any asset, it's a taxable event and this could very easily apply to a coin. I would understand this to mean that if back in the 1960's I bought an 1877 IHC and wanted to sell it today, I'd technically owe taxes on the appreciation. Is this correct?

My question is:

Are coin collections treated the same way as stocks if they're part of your estate?

For example, if I own a stock that I bought at $10 and it's now worth $100, my capital gain is $90 on which I would owe taxes if I sold the stock. However, if I will it to my son and die, he would get the stock at the Stepped Up Cost Basis of $100 and could turn around and sell it without any tax burden.

So, does this same Stepped Up Cost Basis apply to a coin or coin collection?


thanks muchly,

rono

 

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Good question....another one for those of you who have a side business of "Coin Dealer"
How does the purchase of coins for stock work into your taxes?
How is the IRS ruling for Coin Dealers in General??

Thanks

RickieB

 

How do they prove what you bought it for???

For example, one of the shops I buy from only takes cash and doesn't give receipts.

The other give receipts, but you could buy 10 slabbed coins, 10, 10oz bars, 3 SAEs and 2 proofs sets and a magazine and the receipt would say one grand total, its not itemized...

So what would keep me from buying a coin for 50.00 cash selling it for 200 and saying I bought it for 150, so my gain is only 50?

Plus, I could deduct for shipping or cost to drive to the shops to get the coins...

Same with Bullion, the price bounces daily...

 

With the warning that I am neither a tax attorney, CPA or IRS Enrolled Agent, my experience has been that the tax basis of the new owner in all assets received by inheritance - including through a living trust upon death of the Trustor - is the value on the date of death (except in the case of large estates where a different date has been properly elected on a Federal Form 706 Estate Tax Return).

(Remember - free legal or tax advice is frequently worth less than you paid for it.)

Honesty?

 

To whom?

 

smullen wrote:

"How do they prove what you bought it for???

For example, one of the shops I buy from only takes cash and doesn't give receipts.

The other give receipts, but you could buy 10 slabbed coins, 10, 10oz bars, 3 SAEs and 2 proofs sets and a magazine and the receipt would say one grand total, its not itemized...

So what would keep me from buying a coin for 50.00 cash selling it for 200 and saying I bought it for 150, so my gain is only 50?

Plus, I could deduct for shipping or cost to drive to the shops to get the coins...

Same with Bullion, the price bounces daily..."

The IRS doesn't have to prove what you bought it for. Your basis in the asset is considered to be $0.00 unless you can provide documentation to the contrary. So in your senerio above, being that you have no documentation of what the purchase price of the coin in a tax audit situation your taxable gain would be $200 less the face value of the coin.

 

talking about taxes,for those who sell on ebay, i came upon this:
http://sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/02/24/MNGMPOAK5C1.DTL
and
http://www.ft.com/cms/s/657692b0-c03e-11db-995a-000b5df10621.html

to maybe come into effect from next year.

 

How about being honest for the sake of being honest?

​

 

EXACTLY. The "burden of proof" is on YOU, brutha. The IRS doesn't have to prove what you bought it for.

Keep all your receipts. Demand they give you one, or shop elsewhere. "Takes only cash, gives no receipts..." Hmmmm.... no trackable transactions....

If you have no receipt, the IRS can, and may, argue you got it for $0 and ALL the proceeds from sale are taxable. Ouch.

Being ethical and 100% honest is NOT enough when dealing with the IRS. If you can't document it, it didn't happen. You must have documentation, or you're at risk.

 

Sure. That's part of the legitimate cost of the coin.

I wouldn't try that one. "Real" coin dealers deduct cost of travel to attend coin shows (plane / car, lodging, food, transport costs for inventory - sometimes costly armored cars). And they keep all receipts.

The IRS is pained to call collectors "dealers". When in doubt - pay the tax. I don't mess with the IRS. They do not require "due process of law" to hit you with penalties. The burden of proof is on YOU, and the IRS wins most Tax Court cases.

 

Howdy all,

Thanks.

As for deducting business expenses associated with your hobby - tough. You can do it for a legit business, but you must demonstrate that it's not just a hobby and really a business by having had your shingle out for 3 years worth of dealings. And they're very sticky on this - it's prime time audit country.

And as for tax burden and yeah, I know all about 'who's to know' and all, as 900fine stated, if they blue meanies come after you, the burden of proof is on you. Period.

And thanks, satookoko. That's what I figured but I wanted to get an opinion around here specifically about coins.

And so the easy way to is collect them FOREVER and will them to your heirs.

Neat. Works for me.

peace,

rono

 

Looks like I have it easy. Don't have to pay taxes yet! Must buy all the coins I can get before I'm legal age lol. Till then, must enjoy it while lasts lol. Quite interesting when you think about all this. An interesting topic in my mind.

Phoenix

 

I hate to burst your bubble, but the income tax laws apply to everyone, regardless of age.

My youngest granddaughters (2 & 5 years old) get 1099s for investment income and savings account interest, and would be subject to tax if their total income passed a defined threshhold.

 

Darn! Excuse my ignorance, so if I buy a coin for $10, and sell it for 20, I would have to pay taxes? I don't understand that much about it. How would I go about paying them? Sorry, I don't quite understand it that much. Thanks for the advice so far.

Phoenix

 

You must have some bookkeeper. Try telling that to the revenue guys.

 

Possibly. You would have taxable income of $10, but whether or not you would have to pay taxes depends on your total taxable income for the year. Whether or not you would have to file a tax return depends on your total income from all sources, your family status, and other facts. This is not an income tax forum, I am not a specialist in taxes, and I don't propose to write a treatise on the subject.

End of sub-topic so far as I am concerned. :whistle:

 

When ebay starts reporting the income of sellers who sell over $5,000.00 in sales next year (2008) it will be a big wake up call for the hobby. If you don't keep records, this would be a good time to start learning how to.

 

Andrew:
Where did you hear this?

 

More tax crap

Some states charge sales tax on coins like NJ and Pa. does not

 

I've heard this kicked around a few times too, but never read anything official...

My sister (who sells tons of crap on e-bay) said she got something in e-mail from them (e-bay) saying they were going to start providing the IRS documentation on what sellers have made and more info would be fourthcomming...