A Newbies Question about coins & taxes

coinfool

Hello to all!

Sorry for what is I'm sure a mundane question, but I am brand new at this & would consider myself a collector. I purchased some coins that are sitting in my safe. I have sold none, but then I receive this 1099-B saying that I have to report this phantom amount of "profit" or "revenue" or what ever. How is it possible to tax someone on something that he/she has not sold or realized any profit? Do strictly collectors have to do this every year, even if they never sell? Where do they get the figure? In everything else concerning investing you pay the taxes AFTER the sale or a revenue is realized. It's true of stocks. It's true of interest income. What's up with that and is there any loophole around it, or did I just misunderstand the 1099 form, although it seemed clear. Could you knowledgeable ones help? That is for the IRS, who should be abolished--it's Boston Tea Party Time.

Dave99B

A 1099-B, related to coins you purchased? ..... I'm lost...

Dave

JrGMan2004

*looks to wingedliberty* He could probally tell you...

oreville

Someone had to issue the 1099-B to you. The issuer of the 1099-B is usually the one who bought something from you such as stock unless a broker is involved.

1099-B are issued to the seller when they sell not when they buy.

If you are dealing with commodities futures, that is another whole ballgame. It is called marked to market but is issued to commodity traders who are in the business of trading. I forget the form number offhand on that one.

coinfool

So, Oreville, just as an example, say I purchased theoretically some modern from a dealer -- 20 American Eagles, 20 Austrian Philharmonic's, and 20 various silver coins. If I'm holding them, and not involved in any of the complex things that were spoken of, do I pay taxes if they are not sold?

Sequitur

If I'm holding them, and not involved in any of the complex things that were spoken of, do I pay taxes if they are not sold?

Not exactly sure of the context here, but generally speaking, no, you need a taxable event to incur taxes.

coinfool

Another way of putting it is do any of you have to pay taxes on coins that you haven't sold?

coinfool

Thanks Sequitur. Now don't think me too foolish, I'm just being careful. So you're saying, like a stock that you don't pay the tax until you cash out and realize the profit (BTW, I dig the Canadian Coin above your name). I'm a huge fan of Canadian Coins because I think they are very creative & have many beauties---like yours

Deadhorse

I think the IRS has a special section just for coin collectors. If you make a profit you have to pay taxes on the capitol gain.

If you lose money on a deal, you can't declare the loss because it's just a hobby.

That's not really the way it is but it's pretty close.

If you are talking about a coin or profit under a few hundred and it's only one coin, I wouldn't even bother with mentioning it.

coinfool

God Bless the IRS & their 1,000,000 contradictions and double standards

oreville

coinfool: Who sent the 1099-B form tom you? Is it filled out or a blank form?

No, you have to sell them to incur a taxable gain (and or loss if you declare yourself to be an investor).

In my opinion, buying 20 SAE's, Phils, etc, is not collecting............ that is investing which is a good thing if you incur capital losses.

coinfool

The coins were just a simple example. The 1099-B form was sent to me by the coin dealer who sold me the particular coins, and in a box was a number and the explanation on the back said that I needed to put that number on schedule D, Capital gains & losses, and speaking of losses--I was at a loss and raging mad saying, "How in hell can they tax you on some ethereal number on revenue that has not been realized--NOTHING HAS BEEN SOLD!!!" That's why I came to you all because I knew some here would know.

coinfool

BTW, I love the old coins. From the late 1700's to the early 1900's we made beautiful coins (some of them). I also love some of the ancients and it's shocking how inexpensive they can be.

1jester

Coinfool, maybe the dealer was trying to do you a favor by letting you know that if you do decide to sell, the IRS will be watching you for any profits made?

Sequitur

like a stock that you don't pay the tax until you cash out and realize the profit

Yup. Something really doesn't make sense here.

Normally, you shouldn't get the 1099 until you've sold, i.e. a reportable sale. Now everyone has seen a 1099, we all do from share and fund redemptions. So that "B" means it came from someone other than an investment house or bank. One of the bigger dealers on this forum can better explain the genesis of a 1099-B in a coin transaction.

Now if you have a "cash" transaction (i.e. hard cash versus wiring funds or personal check) greater than $10 grand, that's supposed to be a reportable transaction and triggers one of those pesky 8300s. How did you pay for the coins? Could this be what triggered it?

Bottom line is, if you didn't sell, you don't owe a tax.

So, Oreville, just as an example, say I purchased theoretically some modern from a dealer -- 20 American Eagles, 20 Austrian Philharmonic's, and 20 various silver coins.

Not sure about the foreign coins, but I remember one of my peeps telling me ASEs are not reportable, no matter how many you buy or sell. Launderers, celebrate!

I think they are very creative & have many beauties---like yours

Holographic maple -- love it. RCM has much more creative ideas than the U.S. Mint -- but I still like U.S. coins, even the moderns, and U.S. is what I collect. But I understand and appreciate the unsurpassed quality of the RCM.

oreville

Sounds like the dealer sold the coins and you did well by him. I have a feeling he was trying to score additional public relations points by giving you free advice and then screwing up the explanation to you. Happens a lot when people half listen to their accountants.

RCM does do a great job with their many ideas. The problem is they do too many! Too much of anything is no good at all.

Sequitur

The problem is they do too many! Too much of anything is no good at all.

I second that, and I concur. The best is the baseball card forum. I feel bad for the sportcard folk -- all those companies have flooded the market with so many damn cards, products, special collectibles, series, reflectors, game crap, and more stuff stuff stuff that it has destroyed the hobby.

I also think that's why coins are superior collectibles -- the gatekeeping function of the various countries' mints.

AmericanSilverEagleCoins

Many times the IRS doesn't like to wait for their money so they may make you pay incremental payments on your expected loss/gain. In reading the IRS instructions for 1099-B there is an area near the bottom about real/unrealized gains on foreign currency contracts. Here is the IRS Form 1099-B. Sounds like you may need to take this to your accountant when you get your taxes done.

Sequitur

Many times the IRS doesn't like to wait for their money so they may make you pay incremental payments on your expected loss/gain. In reading the IRS instructions for 1099-B there is an area near the bottom about real/unrealized gains on foreign currency contracts.

Wow. If that is the case, and I'm not disputing that it is, I don't know how in the hell they can calculate an "expected" gain or loss. I mean, look at the volatility of the metals markets -- I could be looking at a gain one week, a loss the next, depending on which way the wind is blowing (read: the Federal Reserve).

How in the hell does the IRS determine an "expected" gain or loss in bullion? Is this based on one calendar year? And what if, over the course of 12 months, my coins lose money, but I have no other tax liabilities from which I can apply the loss -- does the IRS then cut me a check or refund last years' tax? Or do I need to carry these losses forward until I incur a separate taxable event, akin to capital gains and losses?

I don't get this at all, but look forward to seeing more informed responses on this.

Newmismatist

<< <i>Not sure about the foreign coins, but I remember one of my peeps telling me ASEs are not reportable, no matter how many you buy or sell. Launderers, celebrate! >>



I've got a sneaky suspician if you buy a whole lot of ASEs at say $5 each and then sell them for say $10 each, that the IRS's view of that transaction would be a taxable gain that should be reported on your Schedule D either as a Short term gain or a long term gain depending on how long you owned them.

Deadhorse

Um, my memory may be a little hazey here but when Nixon devalued the dollar in 72(?) part of his presidential edict was that American's do not have to report oownership of gold or silver coins.

Profit and taxes are another thing, but you are not required to report ownership of such items. Perhaps someone more knowledgeable here can shed more light on this for me.

Thanks.

Boom

T A X E S S U C K !!

ldhair

You might want to call the dealer and ask. Sounds like it might be a simple mistake.

A funny side note not related to anyone here.
I once knew a guy that got even with folks that cheated him out of rent by sending them a 1099.

oreville

Ok, here goes:

These are the facts:

Foreign currency contracts are similar to commodities in that they involve FUTURES, a promise to exchange the item in questionin the future for future dollars. Businesses are even required to report gains and losses from foreign currency exchange and losses even in their audited financials. Standard stuff.

Commodity futures such as heating oil, pork bellies, gold and silver FUTURES are required to report unrealized gains as well as losses since they are "marked to market" on Dec 31st and reported on form 5781 since they involve straddles. Would take me pages to explain. Yes, you pay on unrealized gains and get $ on unrealized losses. Anyone desling in these futures generally know these rules.

Ownership of the actual gold and silver does not require any reporting, including ownership unless you are a mining producer of the silver and gold in which case inventory valuation at year end might cause profit and loss reporting changes depending on the method of inventory reporting.

Ownership of actual gold and silver coins are further exempted from reporting requirements in that sale of U.S. gold or silver coins do not generate a form 1099-B since they are specifically exempt from IRS paper reporting rules.

However, they are required to be reported as short term gains and losses (under 1 year) and long term gains and losses(over 1 year). Long term gains do not benefit from anything less than the 28% maximum tax rate unless you are in a lower tax bracket. No 10% or 15% favored LT cap gains rates for coins (collectibles).

Hope this helps!