Auction houses and the IRS.

Shamika

If one were to place a large consignment with a major auction house, does the auction house report the consigner's sales total to the IRS?

If so, is there a minimum amount below which it is not reported?

Julian

As far as I know, there is no requirement for any purchaser to report to the IRS, unless the proceeds are in green cash.

Checks are normally the way that consignments are settled and remain part of the dealers records.

Reporting to the service is an obligation of the recipient, the same way that any income or loss is recorded.

Your accountant can give you more definitive regs. Hope this helps.

Shamika

Julian,

Thank you for your help.

Cameo CC

The auction house does have to report to the IRS.

What happens is that when a collection is sent to the auction house, a base value (the price the collector paided for the coin or value at the time of purchase) is determined. After the auction, the aution house is required to determine an capital gains receive and report them to the IRS for income purposes.

Todd

Shamika

<< <i>What happens is that when a collection is sent to the auction house, a base value (the price the collector paid for the coin or value at the time of purchase) is determined. >>



But how would the auction house be able to determine the price paid by the collector? Do they ask?

Cameo CC

How the value is determined.

Let’s say that someone bought a coin in 1972, but does not remember what he paid for it. A base price is determined by examining the value of the coin from 1972 prices. The problem is the grade. Since grading services were not in existence at that time, what was the grade he paid at in 1972? In the end the determination is subjective and best guess is used based upon the present grade and what is believe the grade they paid for it in 1972.

You can call Heritage and they could give you more information on the relationship between auction houses and the IRS.

Todd

Barry

<< <i>The auction house does have to report to the IRS.

What happens is that when a collection is sent to the auction house, a base value (the price the collector paided for the coin or value at the time of purchase) is determined. After the auction, the aution house is required to determine an capital gains receive and report them to the IRS for income purposes.

Todd >>


I don't think this is correct. The auction house has no way of knowing what you paid for the coin or how long you owned it. Since we're talking capital gains, let's compare it to stocks:
You own a stock for 10 years. You've switched brokers a few times. You sell the stock. All the stock broker reports on the 1099 is the proceeds of the sale - how many shares, sale price, etc. The broker has no idea when you bought it or for how much. You are required to document the purchase price and calculate the gain or loss on your Schedule D.

Maybe it's different for coins.

dollardude

Let me throw in my two cents from owning a small real estate business. IMO, anything you buy, be it real estate, stocks, bonds, mutual funds, rare coins, etc., and later resell at a profit (or loss) is defined as a capital gain (or loss). YOU are responsible for YOUR own records, and can use an accountant to help you if you wish to pay for one (if you do use one, this is a tax-deductible expense). In this case, auction houses can give you a breakdown of what sold for how much, and their fees for selling them for you. Take the sales price, subtract the sales fees, and compare this with what you paid for them. That is your capital gain (or loss).

Cameo CC

The information I have provided is from Heritage's book, "The Rare Coin Estate Handbook" by James Halperin, Steve Ivy and Gregory Rohan (IvyPress, 2000). Granted that this is for an estate, but on page 53-54 of this book, it says

"An appraisal of the value of the collection at the date of death is required. The IRS stipulates that the "bulk sale method" appraisal should be used. In other words, what the collection would have brought if sold in one bulk sale to a dealer at the date of death. This is very important, especially for valuable collections that are part of large estates, and is a benefit to the heirs.

If a dealer would...value the collection at $100,000... However, for the purposes of estate taxes, which could be as much as 55% on estates values above $1,000,000, the applicable percentage is only levied against the $100,000. If you end up consigning the collection to aution or shop it around for the best offer, you would only be responsible for the much lower capital gains rate on the amount over $100,000. Consult your attorney or tax advisor"

In the end the individual is responsible to reporting any capital gains from the proceeds of the sale. I do believe that the auction house may have to report large sales to the IRS.

Todd

BigE

The above post would lead me to believe that one should sell their coins while still alive if at all possible---------------BigE

BigAl

Todd,

I think that book may be confusing you a bit. The book is most likely stating the importance of having an appraisal done at the death date for computation of estate tax. While they may perform the appraisal, the do not report this to the IRS. That is the job of the executor of the decedent's estate. I've never sold coins on Heritage, but I would be very suprised if they reported anything to the IRS. There may be a reporting rule concerning the purchase of certain amounts of gold bullion, but that is a separate issue.

With estate tax (a death transfer tax), the value of the decedent's estate is appraised at the time of death. The estate (and heir) has the option of using this value, or the value of the collection 6mo. later (only if it lowers the tax) as the value for determining estate tax. But, if the collection is sold anytime within this 6mo period, the sale price will be used to determine any transfer tax. Heirs do not pay tax on property received in a death transfer, however the estate will if the total value of the estate exceed 1Mill in 2003 and 1.5 in 2004, and as you can see the tax can be steep.


The above post would lead me to believe that one should sell their coins while still alive if at all possible Big E, this may or may not be the case....if a collector dies in 2004 and the total value of the estate is under $1.5 million they will not be subject this "estate tax". The decision to sell/keep/gift property will vary from person to person, and tax rules in this area are subject to considerable change.

lloydmincy

Heritage's book, and the section noted on this thread, points out the fact that an ESTATE TAX calculation may/must be met for the "Estate and GST Tax Exception and Taxation" for that particlular person's DEATH ESTATE. The AUCTION firm is not responsible for the IRS reporting while person is ALIVE, nor does it report if the person is ALIVE, unless CASH SALES OR PURCHASES over $10,000. Whether a small or large sale, only the SELLER is responsible for the reporting.

BigAl

anything you buy, be it real estate, stocks, bonds, mutual funds, rare coins, etc., and later resell at a profit (or loss) is defined as a capital gain (or loss). YOU are responsible for YOUR own records

DollarDude, while it is your personal responsibility to calculate gains/losses, Brokerage houses do report gross sales of stocks, bonds, and mutual funds to the IRS and send you a 1099 at year end. True they don't calculate profit and loss, but it does tip the IRS off that they should be expecting a schedule of gains/losses from the taxpayer.

With that said, I suppose auction houses could report a gross sales figure to the IRS....I'll shoot them an email.

BigAl

Shamika,

just got word from Heritage....as I suspected, they are NOT required to 1099 their consignors---so no reporting.

BigE

Thanks for the info. Al------BigE

gemtone65

Cameo CC's information is almost certainly incorrect. I know of no requirement for the auction house to report the capital gains on any consignment. Moreover. there is really no way for the auction house to know what the capital gains are. The obligation to report profits on the sales of collectibles is on the owner of the items. Accordingly, Cameo CC has misinterpreted the cited passage by Heriatge in several regards, and it would behoove readers to seek advice from someone more knowledgeable.

Shamika

<< <i>just got word from Heritage....as I suspected, they are NOT required to 1099 their consignors---so no reporting. >>



BigAl,
This is indeed what I've experienced. I consigned a small group of coins, about $2000 worth, to Heritage and did not receive any kind of tax form at years end.

Thank you everyone.

Wolf359

No 1099, that's good to know. It would just confuse things anyway, when no taxes are owed.