Income Taxes on the sale of baseball cards?????

miami3

Does any one know the IRS ruling towards paying income taxes on the sales of baseball cards???

A "friend"asked me about this yesterday and I could not give him an accurate response.

This topic may have been brought up before, so if I'm beating a dead horse please except my apologies.

I checked out the IRS website and not find anything pertaining to this issue.

Has anyone out there ever been audited by the IRS?????

How do you go about proving any profits or losses if you do it strictly as a hobby????

Any help would be appreciated and no I do not work for the IRS or the government.

Thanks!

Jim

onegaucho

As far as buying and selling, my account has told me I don't need to report (yet)... I hear CA is trying to pass a law to charge sales tax on internet purchases (not sure if this would extend into eBay purchases though).

But I did donate about 20k cards so I had to provide a Beckett for prices as well as document how much I paid for them.

toppsgun

All income is taxable from whatever source derived, unless specifically excluded by the Internal Revenue Code.

Cards are considered collectibles and as such are not afforded favorable capital gains rates, but any gains are taxed as ordinary income, up to the top tax bracket rate of 35%.

Cards sold at losses may or may not be deductible. If you report losses and take expenses as deductions (shows, supplies, mailing, etc), you have to show a profit 3 out of 5 years or the IRS will likely consider it a hobby and not a business. Hobby losses are not deductible. IRS can go back 3 years or more to disallow losses if it's deemed to be a hobby.

That's the income tax angle. For a discussion on sales taxes, please refer to your state comptroller's office. Generally speaking out of state sales are not subject to sales taxes, but that could be an area worth a deeper look.

Vargha

I don't know. All of my card transactions have resulted in losses.

rickster

I believe that cards and memorabilia, if held at least one year, qualify for capital gains treatment. However the applicable rate is 28% instead of the 15% rate for other types of capital gains.

Rick

jerster

I never sell for a profit so I fear not...

WinPitcher

DON'T TREAD ON ME This year I had to pay 35.00 in sales taxes (reported on my state form) for all internet purchases regardless where I bought them. Cheap when the amount if itemized was much greater.

iamthegreatcornholio

It also depends on if the gains were long term or short term (1 yr). I picked up some short-terms gains last year. Also, if you have no W-2 income (like if this is your job) they may not be classified as investments but rather employment (kinda like if your job was "day-trading"), which would mean you'd have to pay that God-awful SE tax to help support the democrat's communist plot of social security. Also, it is not wise to use the word "hobby" since with a hobby you must report gains and cannot deduct losses - another classic case of the IRS's "heads - i win; tails - you lose" mentality.
Brian

chrisrenaud

As a CFO, I think this is a pretty straight forward issue. Sports cards are like short term investments in stocks, at least from a tax perspective.

When you purchase a card with your after-tax income, you have a basis (i.e., how much you paid for the card). If you purchase a graded card that is your basis, if you purchase a raw card the price is what you paid for the card plus any grading fees and postage.

When you sell the card, your gain (or loss) is simply the difference between the net sales price (net of pay pal fees, postage, insurance, etc) compared to your basis. If you have a profit than it is ordinary income to be taxed at whatever your particular marginal rate is.

If you have a loss, I believe that you can keep track of the losses in order to utilize the losses to offset future gains on the sale of cards or other collectibles (not stocks).

I do think however this is mainly an issue if you have a huge gain to be had from having a lot of vintage cards you found that you sold or from getting lucky or being really smart in some other way. If you are putting up a 52 Topps Set in all PSA 8/9 I would focus on this.

As a collector, not an investor, I have a big box where I throw all of the receipts from my purchases just in case one day I need to sell the collection (hope not while I am alive) or when the day comes that I pass along and give away my cards that there is at least a basis.

Hope this helps. I am not an accountant, rather an investment banker/cfo with some understanding of accounting but I think this advice is sound.

mariner

Jim...

chrisrenaud has it nailed. I think his advice is correct.

1967topps

>>How do you go about proving any profits or losses if you do it strictly as a hobby????

This probably isn't quite the answer you wanted since I do report income/expenses on
a schedule C under a general classification "mail order business"

As I understand it, if you show a net business loss too many years (like 4 out of 5) they can
tell you that your Business is more of a hobby because you are not doing anything to
show a profit any year, and they don't let you deduct expenses any more.

Customer: How much is 2+2 this year?
Accountant: How much do you want it to be?

1967topps

>>Cards sold at losses may or may not be deductible

For any card sold you have an income, and your "cost of goods sold" so yes, the CGS reduces
the taxable income, all on schedule C

RTB

The way I understand it, collectibles can be handled in column g of Schedule D, which is the short and long term capital gains form. If you happen to have a net loss from stock sales you can in effect offset the capital gain from the cards since the arithmetic takes place on the same form.

Basilone

<< <i>As a collector, not an investor, I have a big box where I throw all of the receipts from my purchases just in case one day I need to sell the collection (hope not while I am alive) or when the day comes that I pass along and give away my cards that there is at least a basis. >>



You should be getting a nice tax break.....