question about sale of coins and the IRS

goose3

I have a coin I am considering selling to purchase another coin or some other coins. I've had the coin for probably 2 years and it has appreciated.

The coin would probably sell for 11-13,000.00 or possibly a touch more. who knows.

What are my responsibilities concerning taxes if I do any of the 3 following things:

1. sell on ebay
2. sell outright
3. consign to dealer


Basically I don't want to have to claim crap. I am a collector, not a dealer or an investor. I am going to use the money I receive for more coins.

Does the method of payment on 1 and 2 matter?

thanks

Iwog

Hobby profits must be reported as income, although if it's not a business you aren't required to file a Schedule C.

I believe the Capital gains taxation rate would apply (10-15%) so at least you're given a break there.

The question of IF you should report this on your tax return is personal and outside the realm of this board. If audited, you can expect a minor penalty on the unpaid tax. The odds that you would ever be discovered is negligible.

goose3

but aren't banks required to report checks and transactions over a certain amount?

kranky

I believe the cutoff for reported cash transactions is $10K.

You might investigate whether a trade for other coins would avoid having to recognize the taxable gain.

Dave99B

Goose, you selling a Chain Cent?

Dave

p.s. Screw the IRS.

Deadhorse

The 10K figure is for cash transactions only. It does not apply to checks, cashier's checks, bank wires, etc.

I have regularly wired amounts well in excess of the 10K to and from my bank with no additional paperwork nor reporting needed.

That magic number ONLY applies to cash.

gemtone65

I believe the proper treatment for a collector in all instances is to subtract the original acquisition cost of the coin from the net proceeds realized from the current sale of the coin. The resulting profit is ordinary income to you for tax purposes.

Alternatively, you may want to consider whether you would qualify as an investor for the purpose of the sale. In that case the profit realized would be considered a long-term capital gain, and be treated much mor favorably for income tax purposes.

coinlieutenant

Goose,

If you make money on it and want to claim it you have to pay on it as long term capital gains or you can do a schedule C which will have it taxed at your income bracket level.

PM me for more info as I just started doing my schedule C this year.

John

BillJones

Under the law you are required to show hobby gains. Hobby losses are not deductible UNLESS you have gains. If you have losses you can offset them against the gains.

There are loads of "underground economy" things going on in which people are paid in cash or trade services. If the IRS catches you, which may not be likely, they can do their number on you. Checks create a record that can be traced. If you deposit a check for $13K, and it's unusual, you could get into trouble if the IRS audits you. REMEMBER with the IRS you are guilty until proven innocent regardless of what it says in the Constitution.

You can trade one coin for another and not have to report the gain. For example if you trade coin for which you paid $500 for one that is worth $10K you don’t owe any tax. BUT when you sell the new coin, your cost basis for tax purposes will still be $500. AND if you trade that coin for something else like an automobile or for repairs on your house, it is not a “like asset” and you will be liable for the tax.

I’m not sure about getting capital gains tax treatment for coins. I know that years ago the law was changed, and that coins lost their capital gain tax status. (i.e. It’s treated as “normal income”) You will need to check with your accountant on that one.

My attitude is to “render unto Caesar what is Caesar's.” My dad had tax trouble in the 1950s when his accountant did some funny stuff. He get hit with additional taxes, interest and penalty, and he was on the “hit list” for audits for the rest of his life. The IRS says they don’t have hit lists, but I don’t believe them.

And oh yes, I read in the paper today that the IRS is increasing the number of audits that they will be doing on individuals.

lava

Reporting is also triggered by use of money orders above $3000, I just learned.

From your question, I think 2 things are key: if your cost was high, there may be no taxable gain, and even if there was a gain, that can be offset against losses. You need to keep records, and if you track everything, there should be a way to accomplish your goal.

BigAl

Under the law you are required to show hobby gains. Hobby losses are not deductible UNLESS you have gains. If you have losses you can offset them against the gains.

this is correct. But ONLY if you are a collector; if you are a dealer gains are treated as ordinary income.

I believe the Capital gains taxation rate would apply (10-15%) so at least you're given a break there.

unfortunately this is incorrect. collectibles held LONG-TERM (>1yr) are taxed at either 15% (for taxpayers in the 15% or lower tax brackets) or 28% (for taxpayers above the 15% bracket). All short term gains are treated as ordinary income and taxed at your ordinary income tax rate. (note these rates are different from the "new" long-term cap gains rates of 5/15 percent)

Generally, gains are defined as the amount realized from the transaction less your adjusted basis in the property sold. Generally, all gains are reportable as gross income regardless of disposition method or amount. Hope this helps!

louiskeller

If an individual, (not a Company), sells something at a higher price than the paid price, what are the obligations of the individual to the I.R.S.?

I'm not trying to avoid taxes or cheat our govornnent, but really would like to know.

Can anyone help me?

Thank to all.

mozeppa

<< <i>Reporting is also triggered by use of money orders above $3000, I just learned. >>




is that 3000 in a one lump money order?.............cumulative over a given period?

i've not been able to get a money order over 1000 dollars....where would you get one for 3000 ??????

MrEureka

is that 3000 in a one lump money order?.............cumulative over a given period? i've not been able to get a money order over 1000 dollars....where would you get one for 3000 ??????

A cashier's check (bank check) for 3K will expose you to the same risk.

charley

Create Trust,(example-clifford)Trust name ......(childs'name)Educational Trust.Place piece on Trust schedule. Grantor/Grantee status to expire and revert to you in 15 years.Trustees-wife (or whoever else you trust-nopun intended)and atty. Free trading,buy,sell, etc. File proper 1040.Depreciation also applies, as does Grantee (you)fees. Not complicated-$400 or so to set up(tax deductible).Just suggestion,if concerned. Can also go offshore banking transaction route-but why?No tax break,even if legal. Regards.

charley

Almost forgot-all non-corp. $instruments over $5000 automatically flagged for future "same source" activity. The 10K figure is correct-but don't try the "Homer" route-2ea. 5K or some varient thereof.

Dave99B

The IRS is for the "little people"

ldhair

Anyone know how the IRS looks at it if you don't have an invoice to prove your basis?

Will a printout off the PC showing what you paid work?

Im thinking if you don't know what you paid and have no paperwork, your basis is 0.

How does all this work?

goose3

Right LD,

who's to say I didn't pay 11000 for this coin 2 years ago when/if it sells for 11,000 tomorrow.??

lava

In response to an earlier question, money orders max out at $1000, so when you want to send $3000, the po gives you three money for $1000 each, along with a special form (ps form 8105-A). The $3000 is calculated per day, so I suppose you could circumvent the form (called a Funds Transaction Report, or FTR) be going to the po 2 days for $1500 each.

mrcommem

Here is an article I found that shows you how to handle taxes on coins. Profit on coins is considered a capital gain and is entered on Schedule D same as stocks. The article linked below shows you how.

Income tax on collectables

jdimmick

John,

I know which coin you are selling? Did you locate a buyer?

jim

edsondl

<< <i>who's to say I didn't pay 11000 for this coin 2 years ago when/if it sells for 11,000 tomorrow.?? >>



It is the seller's responsibility to prove the price when purchased, usually with a receipt. As said above, "with the IRS, one is guilty until proven innocent"

Now imagine if you bought a quarter for 25 cents and had it graded as MS70 and sol it for $10,000. That would be all profit in the eyes of the IRS and taxable at 28% if you owned the coin for more than a year (and yes, the four months it was at PCGS would count)

If you are buying new coins with the proceeds from the previous coin, then you wouldn't have to pay tax on the gains. However, as said before, you do need good records as when you sold the replacement coin, the gains would be versus the original purchase price of the previous coin.

Good luck!!

roadrunner

Keep receipts for all your purchases in the event you need to prove your cost basis. Try to do a like-kind exchange as Bill Jones mentioned. You can certainly set up an arrangement with a broker or dealer who can handle the transaction. As long as you get back numismatic material with a 15% premium to face value/melt....you are generally considered to have peformed a numismatic exchange.
If you trade for bullion, bulk gold, etc. that does not qualify...it's essentially the same as cash to the IRS. And this "fuzzy ruling" could change down the road. Maybe 20-30% next time they start to sniff around. But you should not have to lose 10-20% just to do the same concept as a trade. Find a broker or dealer who can handle this for you. There may also be a 30 day rule to complete the exchange too....at least that's the case in stocks I believe.

roadrunner

silverandvinyl

When it comes to banking large sums of money I can only tell you this."Way back in the late 60's I deposit $5000 in $100 bills(I won the $$ at a race track) at the bank I did business with,with in a 10 day period the Feds were at my house wanting to know where I got that kind of money from."Here's why,"if you are not in the habit of depositing that kind of money the alarm goes off at the bank,the bank was obligated to call the Treasury department.If your business calls for large deposits you can pretty much feel safe.Keep this in back of your head," your safety deposit boxes are not safe when it comes to the Treasury Dept."