Taxes and Selling Coins

highcheese

I have to ask a naive question of those of you on this board that have years of accumulated wisdom in the hobby/business.

As an individual, if/when I sell a coin(s) to a dealer or an individual, what should I expect to deal with regarding tax implications?

If I were to sell a coin to a dealer for say $5,000, would this dealer have to report the sale?

What if I sold this same coin for $5,000 but it had cost me $6,000 when I initially bought it and I've sold for a loss? Or what about a gain in value?

Just some things I am weighing as I look at some coins in my meager collection.

Thanks for any and all input

TwoSides2aCoin

We all owe taxes on money we make. If you lose money, you are not liable to pay taxes on that loss, but keep record of your "purchase". You keep track of your own income and they call it "INDIVIDUAL" tax return for that purpose. That's about as simple as I can put this without calling my accountant to explain it.

For example: You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income
Example 2: You buy a coin for $6K and sell it for $5K. You have a loss of $1,000. Welcome to the collector base.

In these examples you will see that the dealer had a 20% mark-up. I hope this helps.

djm

The KISS answer.

If you have not made money selling coins 3 of the last five years. It's a hobby no taxes due or losses allowed. Federal

State laws are different with "collectible coins".

tyler267

General rules about coins and Federal Income Taxes:

1) Never rely on tax advice from an internet chat room.

2) Individual circumstances vary so find a good tax professional.

3) Profit made from a hobby is taxable

4) You can write your hobby losses off against your hobby profit.

5) If you only have hobby losses you cannot write them off.

6) Coins, Gold, Silver, ect are taxed at 28% for Federal (or you marginal rate if lower).

7) For inherited coins your cost basis is normaly the Fair Market Value at the decedents date of death (this can depend on circumstances so get specific advice fro your tax pro). Example: Many times if you inherit a coins worth 5,000 on the decedents date of death, you later sell the coin for 5,500, you would only be taxed on the 500.

This is not intended to be tax advice, just a general overview of how collectors may be taxed at the federal level.

truthteller

<< <i>General rules about coins and Federal Income Taxes:

1) Never rely on tax advice from an internet chat room.

2) Individual circumstances vary so find a good tax professional.

>>




Agreed. Some information in coin cyberspace is not so good.


TRUTH

stevkc

<< <i>For example: You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income
>>



Yeah, that is not correct. You probably take grandpa's basis, which would reduce the gain.

stevkc

<< <i>The KISS answer.

If you have not made money selling coins 3 of the last five years. It's a hobby no taxes due or losses allowed. Federal

State laws are different with "collectible coins". >>



Why would there be no tax on income gained from a hobby? Of course there is. Not saying most people actually report them, but technically you are supposed to.

blu62vette

<< <i>

<< <i>For example: You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income
>>



Yeah, that is not correct. You probably take grandpa's basis, which would reduce the gain. >>



Wouldn't you take a stepped up date of death for the cost basis?

StarSpangledBanner

I buy bullion and what not from my local dealers. As long as I pay cash, they don't record the sale and I never write it up on my tax returns.

stevkc

<< <i>General rules about coins and Federal Income Taxes:

1) Never rely on tax advice from an internet chat room.

2) Individual circumstances vary so find a good tax professional.

3) Profit made from a hobby is taxable

4) You can write your hobby losses off against your hobby profit.

5) If you only have hobby losses you cannot write them off.

6) Coins, Gold, Silver, ect are taxed at 28% for Federal (or you marginal rate if lower).

7) For inherited coins your cost basis is normaly the Fair Market Value at the decedents date of death (this can depend on circumstances so get specific advice fro your tax pro). Example: Many times if you inherit a coins worth 5,000 on the decedents date of death, you later sell the coin for 5,500, you would only be taxed on the 500.

This is not intended to be tax advice, just a general overview of how collectors may be taxed at the federal level. >>



Guess I should have read through before responding. What Tyler said. Especially #1, considering the two replies right after the OP were incorrect.

I don't know your situation, your sales volume, and how you are selling, but the truth is that for most people the honor system is going to apply here. Legally, yes, you are supposed to report all income (and generally you can deduct related losses and/or expenses). But generally, if you sell to a dealer or an individual, its not like you have to fill out an IRS form to do so.

BaseballAbs

<< <i>

<< <i>

<< <i>For example: You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income
>>



Yeah, that is not correct. You probably take grandpa's basis, which would reduce the gain. >>



Wouldn't you take a stepped up date of death for the cost basis? >>



I would think an inheritance tax would be applied if done properly.
Just a guess though, taxes are a big mess with lots of variables and loopholes.
Not to mention they change.

BAJJERFAN

<< <i>

<< <i>General rules about coins and Federal Income Taxes:

1) Never rely on tax advice from an internet chat room.

2) Individual circumstances vary so find a good tax professional.

3) Profit made from a hobby is taxable

4) You can write your hobby losses off against your hobby profit.

5) If you only have hobby losses you cannot write them off.

6) Coins, Gold, Silver, ect are taxed at 28% for Federal (or you marginal rate if lower).

7) For inherited coins your cost basis is normaly the Fair Market Value at the decedents date of death (this can depend on circumstances so get specific advice fro your tax pro). Example: Many times if you inherit a coins worth 5,000 on the decedents date of death, you later sell the coin for 5,500, you would only be taxed on the 500.

This is not intended to be tax advice, just a general overview of how collectors may be taxed at the federal level. >>



Guess I should have read through before responding. What Tyler said. Especially #1, considering the two replies right after the OP were incorrect.

I don't know your situation, your sales volume, and how you are selling, but the truth is that for most people the honor system is going to apply here. Legally, yes, you are supposed to report all income (and generally you can deduct related losses and/or expenses). But generally, if you sell to a dealer or an individual, its not like you have to fill out an IRS form to do so. >>



So if a dealer pays cash then how does he account for it in his inventory or when he files a return?

Bought a $5K from an anonymous donor?

Coinsponge

<< <i>

<< <i>

<< <i>For example: You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income
>>



Yeah, that is not correct. You probably take grandpa's basis, which would reduce the gain. >>



Wouldn't you take a stepped up date of death for the cost basis? >>




I think if grandpa gave it to you when he was alive that is a gift and you get his basis. If it is inherited then you get a step up to the time of death. Would be good to confirm with a tax expert though.

highcheese

Coinsponge

I would like to know how those in business selling coins handle taxes. Are gains reported as a business profit or are they taxed as collectibles. Long term collectible gain is 28%(rediculous). Are business profits usually less for small potatoes gains?

stevkc

<< <i>I don't know your situation, your sales volume, and how you are selling, but the truth is that for most people the honor system is going to apply here. Legally, yes, you are supposed to report all income (and generally you can deduct related losses and/or expenses). But generally, if you sell to a dealer or an individual, its not like you have to fill out an IRS form to do so. >>



So if a dealer pays cash then how does he account for it in his inventory or when he files a return?

Bought a $5K from an anonymous donor? >>



I'm really not certain, but there's surely people here who know all about this. I just know when I've sold something (although not close to $5K), they hand me cash and that's the end of it.

TwoSides2aCoin

Coins are more complex than women, but don't take my advice.

droopyd

<< <i>You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income. >>



Not true in most cases. Gifts and inheritances are not generally considered taxable income.

TwoSides2aCoin

<< <i>

<< <i>You get a coin from grandpa worth five grand and sell it. You owe taxes on $5K income. >>



Not true in most cases. Gifts and inheritances are not generally considered taxable income. >>


well I'm no more a proponent of taxes than I am of a welfare state, but always enjoy a lively debate

derryb

Money received by an individual is considered income. Therefore it is normally subject to "income" tax. There are exceptions such as life insurance proceeds. Coins, even for the hobbyist, are not an exception.

basic rules:

Gains from coin sales are taxed as either business income (Schedule C) or Investment income/loss (Schedule D). For most individuals, schedule D is the weapon of choice. Schedule C filers also have to pay an additional "self employment" (Social Security) tax.

If inherited, new owner's basis (cost) is the fair market value at time of inheritance.

Coins are taxed at the collectible rate: 28% if held longer than one year, the individuals regular tax rate (determined by that year's 1040 completion) if held less than one year.

Any transaction not in cash (buying or selling) leaves an electronic paper trail in some form. Swim at your own risk. Depositing cash from a sale leaves an electronic paper trail.

Good purchase, expense and sales records are advised.

The IRS views coins as either inventory or investments and expects you to treat and report them as such.

See the IRS website for filing instructions for both schedules. It is not that difficult to complete the forms yourself. The secret lies in keeping good records. The IRS instructions key you in on what records you need to keep.

johnrav

<< <i>I buy bullion and what not from my local dealers. As long as I pay cash, they don't record the sale and I never write it up on my tax returns. >>



You would not put a purchase down on a tax return, receipt or not. Taxes are on income, or when you sell, the profit. Again, receipt or not you are required to report income on your return.

whether you do or not, is not advice for others.

johnny9434

1) Never rely on tax advice from an internet chat room.

mikeyg

I'm staying out of this one.

TwoSides2aCoin

<< <i>I'm staying out of this one. >>


There's a website for tax and one for coinfacts

timber100

<< <i>I would like to know how those in business selling coins handle taxes. Are gains reported as a business profit or are they taxed as collectibles. Long term collectible gain is 28%(rediculous). Are business profits usually less for small potatoes gains? >>





Should be treated like all other long term capital gains, question, were coins always treated like this or in the past were they treated as long term capital gains when held for a certain period of time?

derryb

If using Schedule C (business income) coins are treated as normal inventory. Schedule D (Investment gains/losses) treats them as collectible investments. While Schedule C offers more expense write-offs it does create additional taxes in the form of self-employment taxes. As one who sells from his home and not treating it as a business, I have filed with both forms over the years. I find treating my coins as investments and filing with Schedule D allows me to keep more of my profit and requires less record keeping.

fishcooker

< I buy bullion and what not from my local dealers. As long as I pay cash, they don't record the sale and I never write it up on my tax returns. >>

You helped them out a ton. The question is, will they return the favor some day (year). Times, they are a changin'...

littlebear

This is not the place to seek tax advice. You will be doing yourself a great disservice.


Larry L.

derryb

This is the place to draw upon the knowledge and experience of forum members with any question concerning coins. When those questions involve taxes or law, answers should always be confirmed by an applicable professional before taking action based on those answers. this forum is an excellent starting point to learn about all aspects of buying and selling coins.

The OP just needs to be aware that even those that don't know an answer will not always refrain from providing one.

LanLord

I really like the fact that early on, someone stated that it's a bad idea to take advice from an internet chat site, yet there have been at least a dozen pieces of advice posted since then.

;p

BAJJERFAN

<< <i>I really like the fact that early on, someone stated that it's a bad idea to take advice from an internet chat site, yet there have been at least a dozen pieces of advice posted since then.

;p >>



I'd bet that if you posed the same situation to 10 different CPAs/tax pros around the country that you wouldn't get a consensus.

Barberian

So what do you do if you sell a coin but have no idea what you paid for it? I have never kept records of my purchases. I only know what I paid for just a handful of coins in my entire collection.

TwoSides2aCoin

Schedule D instructions

Schedule C instructions
Tax laws change often.
When in doubt check it out.

BAJJERFAN

<< <i>So what do you do if you sell a coin but have no idea what you paid for it? I have never kept records of my purchases. I only know what I paid for just a handful of coins in my entire collection. >>



If you can't document your cost basis, the IRS will likely assume it is $0.

BAJJERFAN

<< <i>This is not the place to seek tax advice. You will be doing yourself a great disservice.


Larry L.


>>



As derryb pointed out there is a difference between considering advice and accepting same.

illini420

<< <i>

<< <i>So what do you do if you sell a coin but have no idea what you paid for it? I have never kept records of my purchases. I only know what I paid for just a handful of coins in my entire collection. >>



If you can't document your cost basis, the IRS will likely assume it is $0. >>




Actually, with rare coins and currency you'd most likely win the argument that your cost basis is at least face value.

RichR

Can't speak for others, but here's my plan:

1. Don't ever sell a coin...and therefore don't worry about taxes.

2. Leave everything to your kids...and let them sort it all out!

BAJJERFAN

<< <i>

<< <i>

<< <i>So what do you do if you sell a coin but have no idea what you paid for it? I have never kept records of my purchases. I only know what I paid for just a handful of coins in my entire collection. >>



If you can't document your cost basis, the IRS will likely assume it is $0. >>




Actually, with rare coins and currency you'd most likely win the argument that your cost basis is at least face value. >>



I considered that too. Do you suppose those 3 big MM lottery winners will be deducting their ticket costs?

illini420

<< <i>

<< <i>

<< <i>

<< <i>So what do you do if you sell a coin but have no idea what you paid for it? I have never kept records of my purchases. I only know what I paid for just a handful of coins in my entire collection. >>



If you can't document your cost basis, the IRS will likely assume it is $0. >>




Actually, with rare coins and currency you'd most likely win the argument that your cost basis is at least face value. >>



I considered that too. Do you suppose those 3 big MM lottery winners will be deducting their ticket costs? >>




Of course they should! Not only should the cost of that winning ticket be deducted, but the cost of all of their losing tickets for the year should be deducted as well (and all other gambling losses) as you're permitted to deduct your gambling losses to the extent of your winnings. Every dollar helps

oreville

One piece of advice that many collectors tend to forget.

The grading fees including postage and handling fees should be added to the cost of coins when purchased raw or in an old holder that got updated as well as any CAC fees.