Coin Estate Sales
cameron12x
Posts: 1,384 ✭✭✭
If an estate sale of coins is sold at a loss (relative to purchase price) can it be written off as a loss for tax purposes? TIA.
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I don't think so. Please consult your tax professional, not random people on message boards.
Thank you for your input.
I wasn't reaching out specifically to you, so please don't take it personally.
To protect yourself, you would likely need at minimum the original purchase receipts as well as the newly generated sales receipts.
In honor of the memory of Cpl. Michael E. Thompson
Cash is king in the world of coins and bullion.
I believe if you are reporting sales and you have proper documentation to support a loss you could certainly claim the deduction. Disclaimer: I too am just some random non-tax professional on a message board. Regards!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
I wouldn’t think so. I don’t believe an individual can have a capital loss that they can deduct against their income. I’d imagine the same would be true in this case.
TurtleCat Gold Dollars
Why not? If you purchased as an investment you can most certainly have a capital loss just as you can have a capital gain. I believe there are limits though to the deduction amount.
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Short answer, if heir takes possession and then sells it: Once inherited it becomes a normal, capital asset held by the heir. Gain or loss is reported on the heir's Schedule D. Also note, as discussed below, that inherited property is assigned a new cost basis (fair market value) at time of death, which is normally higher (due to inflation) than original, actual cost. Higher asset basis (cost) equals lower paper profit that results in lower capital gains taxes
If sold by the estate and not transferred to an heir, I believe loss can only be used to offset positive capital gains on the estate's tax return. However, it is possible that the estate may be able to take up to the $3K limit on a capital loss as can an individual. Normally when this $3K limit is exceeded the remainder is carried forward into future years' individual tax return. However, the estate files only one tax return, there is no "carrying over." Can the heirs assume the carried over capital loss? Don't know.
Tax treatment for assets may also depend on if the estate sells the asset and converts it to cash instead of passing the actual asset on to the heir(s). Choice by executor might well determine tax liability. Best to look at taxes in both scenarios to make the best choice.
I would start here
and look this over: Filing an Income Tax Return for an Estate
Inheritances are not normally subject to income tax. Any gain from the sale of them does get taxed whether sold by the estate or sold by the heir. The cost (basis) of an asset gets revalued at time of death. It's new basis is the current market value at time of death. An heir selling the asset (after inheritance) would apply the new basis to the asset. This is likely to lower the profit as it normally raises the cost basis. It is important that heirs document the new basis at time of inheritance even if they do not plan on immediately selling the asset.
Best for an old/dying person to "will" a long held asset rather than sell it and give away the money before death. He will pay much higher capital gains on the asset (using the original cost basis) than the would the heir who sold it upon inheriting it (using the more recent market value as a cost basis). Right before my dad passed away he announced his plans to sell off some real estate that he held for decades in order to give his kids the cash. We decided it was best not to sell, but to "will" the property to his kids. After he passed the kids liquidated the property at a much lower "profit" and much lower capital gains taxes because of the new, higher cost basis assigned to the property upon his death.
Normally there are little to no (and sometimes negative) capital gains on property that is sold right after it was inherited. This is because it sells at or near market value and it just got assigned a new cost basis at market value resulting in little to no profit.
My comments are based upon my own research and experience and should provide you a starting point and stimulate questions you should be asking. I am not a tax professional. If you can't figure out tax issues on your own using the IRS's web published info, seek professional counsel.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Agree with @derryb.
Additionally, there maybe State laws in effect, too.
Advice of an estate lawyer and tax professional is paramount for the Executor (if there is a will) or Administrator (if there is no will).
Been there don’t want to do it again.
Agree with everything here. Here's the opening line from an article written on Nov. 2, 2019 on Forbes by Ashlea Ebeling a staff writer on Retirement info.
"The Internal Revenue Service announced today the official estate and gift tax limits for 2020: The estate and gift tax exemption is $11.58 million per individual, up from $11.4 million in 2019. That means an individual can leave $11.58 million to heirs and pay no federal estate or gift tax, while a married couple will be able to shield $23.16 million. The annual gift exclusion amount remains the same at $15,000. "
Estates under the amounts listed for years 2019 and 2020 respectively are not subject to Federal Estate Tax. If under those amounts the question you pose is mute. Depending on the state of deceased and heirs, there may be some state inheritance tax issues.
Did the executor gig with my father-in-law's estate. He lived in another state and owned property in three states. All the info I needed was on his county's probate court website and the IRS website. Some state's/counties require a lawyer be involved, his did not. Saved the estate and family over $30K in legal fees. I got his quarter collection as a thanks.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
except the IRS does not view "hobbies" the same as "investments".
If I sell my used golf clubs as a loss, I can not deduct the lost value...unless I'm a golf pro.
Ah the joys of dealing with the ever hungry tax monster. Tax what you earn, tax what you spend....and multitudinous other hooks to get your cash....
Oh well.... As long as I am paying taxes, I must be getting income...See?? I can turn a negative into a positive.... 
Ever the optimist...Cheers, RickO
Here is another scenario:
An individual buys coins 5 years ago and decides to sell all of them in 2020, incurring a loss of $5K from the original prices that he paid. Is that different?
Yes IF you are considered an investor. No IF you are not an investor and just collect coins. IF you hold the coins as an investment and you can demonstrate that you are an investor, then you can offset the capital loss up to the amount of capital gains and after that you are limited to $3000 per year to offset against ordinary income. IF you can Not demonstrate that you are an investor then you would Not be able to deduct any of the loss...
Hobby income must be reported on the tax return.
How to report the income and expenses depend on whether the activity is a hobby or a business. The link above will help determine which it is.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Yes, because if he inherits them they get a new cost basis which is current market value. If he sells them he will not see a $5K loss because he is no longer allowed to use the five year old cost basis.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
This got me to thinking about something that really gripes me.
Back when I was a bowler I won a substantial pot at a bowling alley. They had to report it to the government and I had to pay taxes on it. WTH shouldn't I have been able to deduct part of the thousands of dollars I spent on equipment and alley fees? It's not like you can walk in off the street with no experience and bowl over a 700 series!
The question I answered had Nothing to do with inheriting coins. The question was "An individual buys coins 5 years ago and decides to sell all of them in 2020, incurring a loss of $5K from the original prices that he paid. Is that different? "
Under No circumstances can hobby losses be deductible against ordinary income. No circumstances. ...
"An individual buys coins 5 years ago and decides to sell all of them in 2020, incurring a loss of $5K from the original prices that he paid. Is that different?"
Different than what? It is different than inheriting the coins, thus my answer. I don't believe the question has anything to do with a hobby and everything to do with the difference between an estate and a normal taxpayer. The question was a follow up by the OP based on the OP's estate question.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
The OP is the same person that asked "Here is another scenario:" Your answer to his "here is another scenario" is not relevant to what he asked as a "here is another scenario"...
OP has only discussed two scenarios in this thread, an estate sale and a non estate sale. So what do you think he meant when he said "is that different?" I think he meant what's the difference if there is an estate involved or if there is no estate involved.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
for the benefit of others, please explain what you mean by "is that different." Different than what?
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
"I think he meant what's the difference if there is an estate involved or if there is no estate involved."
I Think the OP asked two questions. The second question was a completely separate scenario than the first...
but he did ask "what's the difference?" Like I said, the difference is the basis used to determine the gain on the sale.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
The difference is that under an inherited scenario he would not be considered an investor and under no scenarios would a hobbyist be allowed to offset any loss against ordinary income.
The second question he asked "an individual buys coins" which the deductibility of the loss is determined by whether the purchaser is an investor or a collector. The “is that different” is between something that is inherited and something that is purchased.
His question has nothing to do with basis... Basis is irrelevant because he specifically said "incurring a loss of $5K from the original prices that he paid. " So the loss is $5k regardless of the basis...
Well I certainly don't stack monster boxes of ASEs, tubes of AGEs and slabs of Pre-33 Au for a hobby. They were purchased for investment and the IRS would certainly agree. Capital gains and capital losses are in play just as they are on any other investment.
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Bullion they might agree on. Other things...??? Don't assume the IRS will view your collection of Civil War tokens, mercury dimes or Lincoln cents as "investments".
I’m no tax expert, nor do I play one on TV. So, I’ll just shut my pie hole and offer no advice...😬
Not allowed. The less you know, the more you should opine.
Put more explicitly:
A person buys $20K worth of coins and sells them 5 years later at $15K. Can they write-off the $5K loss?
Method of determining basis is about the only thing that is different when determining capital gain between something inherited and something that was purchased.
His question has everything to do with basis when it comes to taxes, and he is asking about taxes. Something that is inherited has a completely different basis (cost) than something that is not. Basis (cost) is the foundation of figuring taxable gain.
Remember, he asked "what is different?" While he lost $5K from his original purchase because he is required to use purchase price as his basis, if he had inherited the coins today instead of buying them five years ago, his basis would be current market value, not what he paid five years ago. The $5K loss from a purchase five years ago would be a near zero paper loss if the coins were instead inherited and shortly thereafter sold, assuming they sold for near market value. This is "what is different?"
Basis is what is different in each of the scenarios. It's probably the only thing that is different when it comes to determining taxable gain. And when you the use the cost from five years ago as your basis instead of using today's market value, there can be a very big difference in taxable gain.
Normally applying a higher current market value as the new basis to inherited assets will raise their cost (on paper) which in turn lowers the profit and taxable gain when they are sold. In the OP's case, because he will use a higher basis if the coins are inherited, the original $5K loss, before the coins became subject to the new inheritance basis, will be a much lower loss on his tax return.
Most assets gain value over time and an heir is able to use the "current market value" basis to his advantage when selling an inherited asset. This is why, in my earlier example, my father saved tax dollars by not selling his property and giving the cash to his kids. The capital gains from him selling it (using his purchase price from years ago as the basis) would have resulted in a much higher tax bill than the kids were faced with when they inherited and then sold the property using a much higher cost basis. Under current tax law, when assets have gained value over time there is less tax liability if they are sold after the original owner's death.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Yes IF you are considered an investor. No IF you are not an investor and just collect coins. IF you hold the coins as an investment and you can demonstrate that you are an investor, then you can offset the capital loss up to the amount of capital gains and after that you are limited to $3000 per year to offset against ordinary income. IF you can Not demonstrate that you are an investor then you would Not be able to deduct any of the loss...
Exactly, yes but as mentioned above limit is $3K per year.
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
IF you’re Total capital losses exceed the yearly limit of $3000, you are allowed to carry over the losses to subsequent taxable years...
People complain about Amazon not paying Federal Income tax.
Tax loss carryforward is the reason...
More than a few elected officials not paying taxes either. Semper Fi!
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
How does the IRS determine whether a person collected coins as a hobby or purchased them as an investment?
I suppose that THIS is the KEY question.
Are you purchasing coins for your enjoyment or are you purchasing in hopes of selling at a later date with a profit?
The whole worlds off its rocker, buy Gold™.
BOOMIN!™
Does it have to be one or the other? Can't it be both? (Just curious.)
And how would the IRS know? Can they read minds?
Losses are used to offset gains. > @cameron12x said:
Hobby or Business? IRS Offers Tips to Decide
If a hobby is borderline of being a business, the hobbyist might consider treating his assets as investments (IRS Schedule D).
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Sounds like a LOT of paperwork that you should have had in place when you went to get a business license, resale license and what not.
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