Selling bullion question (Tax related)

mrpaseo

If I have 40 merc dimes received from one source and 10 from another source both cost me different amounts but I sell them as a roll.


Should I track both transaction (Lot 1 I purchased/Lot 1 I sold and Lot 2 I purchased/Lot 2 I sold)

or

Can I combine them and average the cost basis?

Lot 1 and Lot 2 purchased.

Lot 1 and lot 2 combined, cost averaged (For my records) then sold as a single lot.

Thanks,
Ray

jmski52

The combined cost is your cost basis for the roll that you are selling. Only one transaction.

mrpaseo

<< <i>The combined cost is your cost basis for the roll that you are selling. Only one transaction. >>



Thank you,
Ray

derryb

As always consult a tax professional for the official word on tax requirements. I recommend you first decide which of two ways you will treat your coins for tax purposes: (1) as a business, IRS Schedule C, or (2) as investments, IRS Schedule D. Visit the IRS website and read the instructions for completing these forms to help you make that decision and to also learn what information you will need to maintain to assist in filling out these forms at tax time.

For tax purposes my coins are investments and since I use Schedule D capital gains/losses tax forms, the following info applies:

Background on the forms: Sales are entered on the forms as line items. Each line item on the forms is limited to items only sold on the same date. If sold on the same date you can combine Items purchased on different dates. Items held short term (12 months are less) have to be a different line item than items held long term, because they go on a different version of the same form. If you are combining items sold on the same date but bought on different dates, cost and expenses for each will be entered as a total for all the items on the line. Precision is not critical, it all balances out in the final totals for all line items. Since date purchased is required on the form, short term items that are alowed to be combined because of the same sale date will show a purchase date of "various-s" and long term items will show a purchase date of "various-l." A review of IRS website instructions for filling out Schedule D will tell you everything you need to have in your records that will be used to fill out the forms.

If you have a tax professional fill out your Schedule D here is what works best:

Keep a separate line item in your "inventory" records for each purchase you make. Include purchase date, sale day, selling fees, shipping fees and any improvement costs such as grading fees. If you combine two or more of these items for a single sale just fairly divide the sales income, selling fees and shipping fees for each of the line items in your records. If you later divide a single purchase (such as a box, or roll of ASEs) for individual sales, just change the single line item into the necessary number of line items to accomodate how you are dividing it up for sales. Ex: you buy 20 coin tube of ASEs for $800 and entered it as a line item in your records. You later decided to sell the coins off individually. Change the single line item with a purchase price of $800 to 20 line items with a purchase price of $40.

Every time you make a sale enter the necessary info in your inventory record. this will be sale price, sale date, and your selling expenses. Once the info for each line item is complete remove it from your inventory (cut if using Excel) and transfer it to your "sales" record for the current year (paste if using Excel). At the end of the year give the sales record to your tax preparer and he will decide what he wants to combine as single line items on tax forms. It will also be important for him to know what was a "collectible" (coins, bullion) and what was not a collectible (coin supplies, mint boxes without coins).

derryb

<< <i>The combined cost is your cost basis for the roll that you are selling. Only one transaction. >>


If using Schedule D (investment profit/loss) you can only combine items as a single sale if they have the same sale date AND if they all fall into same category out of six categories that are called for on the Schedule D subform 8949:
(1) Short term transaction, 1099-B provided by buyer showing basis was reported to the IRS
(2) Short term transaction, 1099-B provided by buyer showing basis was not reported to the IRS
(3) Short term transaction not reported to the seller on a 1099-B
(4) Long term transaction, 1099-B provided by buyer showing basis was reported to the IRS
(5) Long term transaction, 1099-B provided by buyer showing basis was not reported to the IRS
(6) Long term transaction not reported to the seller on a 1099-B

Unfortunately for your personal records, category cannot be determined until right before tax filing time because you won't usually get any 1099-B's until that time. Easiest to keep everything separate in your records and then combine at the last minute when you know whether are not you have a 1099-B. The simplest thing is not to combine on the tax forms. For those items that were sold together just proportionately assign a sale price and sales expense to each of the items and treat them as separate sales on the tax forms. Note that I am only discussing the use of Schedule D and am not discussing what applies to business filers using Schedule C.

mrpaseo

Excellent, thank you.

jmski52

If using Schedule D (investment profit/loss) you can only combine items as a single sale if they have the same sale date AND if they all fall into same category out of six categories that are called for on the Schedule D subform 8949:

I thought that the 1099 reporting requirement for investment or business purchases wasn't passed. I've never received one for any coins I've bought, nor have I been asked for one on any coins I've sold.

derryb

<< <i>If using Schedule D (investment profit/loss) you can only combine items as a single sale if they have the same sale date AND if they all fall into same category out of six categories that are called for on the Schedule D subform 8949:

I thought that the 1099 reporting requirement for investment or business purchases wasn't passed. I've never received one for any coins I've bought, nor have I been asked for one on any coins I've sold. >>


There are different 1099s. The 1099-B is used primarily by stockbrokers to report to the IRS and to the account holder transactions in a brokerage account. I have yet to receive a 1099B for coins I have sold, including an $80K+ sale to one of the cable shopping network coin shows. I do receive 1099-Bs each year from Scottrade. The "categories" I mentioned for the Form 8949 result in a separate 8949 for each applicable category. This means coins sold (with no 1099B received) will appear on a separate 8949 than stocks sold that did result in a 1099B being received. Totals from the various 8949s end up on the Schedule D. The 8949s are simply the place where investment transactions are listed as line items and depending on the category the line item falls into there could be multiple 8949s. A block gets checked on each 8949 indicating the applicable category. This groups together transactions of the same type..

My sale to the cable shopping network could have resulted in a 1099-B, even though not required. Following this particular sale I did receive a W-4 Form to fill out and I had no problem doing so. This led me to believe I would be getting a 1099-B at a later date. When I didn't receive one by the time I was ready to fill out my taxes, I called the buyer's accounting dept. and asked if they were going to send one. I was told it was not required but they could send one if I wanted one. Since I keep good records myself, I told them it wouldn't be necessary. Does this mean I could have gotten away with not reporting the sale? No. I'm sure their tax return shows an expense for what they bought from me and in an IRS audit of the buyer details of the transaction with me would be in front of an auditor. Additionally there are records of my receiving the wire transfer payment and I never want to be in a position where I cannot explain where money came from.

My philospy is if I get to the point where I'm fed up with paying taxes on additional income, I will just cease to generate additional income.