Sorry-Another Tax Season Question

AlfredE

I have read a few posts today concerning how income from the sale of coins is to be reported to the IRS. As a collector, I do sell extra's or doubles as I upgrade my collection, and have listed all of that income (profit) as capital gains.

My questions are concerning "Like for Like Exchanges". If profits (from Ebay or other sales) are turned back over into purchasing other coins, then do I still report this income? Does "Like for Like Exchanges" actually refer only to coin trades where no money was exchanged? Can the IRS track PayPal accounts where money from a sale went right back out for a purchase?

Sorry, I know this topic sucks.

oreville

Alfred: Unfortunately since you were credited (an assumption on my part) with funds from the sale of your coins (via payment into your paypal account) before remitting funds to purchase other coins then you did not meet the terms of the 1031 like kind exchange.

In order to qualify for like kind exchange you must receive no boot at all and the money that accrued to you for the sale of the coins should have been paid directly to another collector for the purchase of his coins which then allows for the swap of the coins between collectors. You need a three way transaction or an intermediary person.

Paypal is NOT an intermediary.

Also do not forget to report the gain (if long term) as 28% long term "collectible" tax rate.

It does not qualify for the very low 10%/20% capital gains rate.

The last question: Can the IRS track PayPal accounts. Probably not on an ongoing basis but certainly on an audit, the IRS Revenue Agents are well aware of the fact that PayPal is a "bank" just like any other bank. All they need is to request the history of the paypal accounts upon audit. You are required to keep records for up to three years after the return filing due date. (Longer if they smell evasion of taxes).

I happen to know a few IRS Revenue Agents (auditors) who frequent ebay themselves. So there are no secrets there (or even here!)

AlfredE

Oreville, Thanks for the answers. My profession as a musician tends to attract the IRS' attention, so I need to be sure I've covered myself!