Theoretical Tax Question

jmski52

If you buy a ($100 face value) bag of half dollars from the Mint for $135.00, can you write off a $35.00 loss after you search them and then decide to spend them?

This would be the reverse scenario of finding a cent in circulation and selling it for $100. Technically, your cost basis is $0.01 and your profit is $99.99, which would be taxable.

derryb

I would deposit them in the bank for the $100 face value and use the deposit slip as my "sales" receipt. Combined with the purchase receipt for $135 you now have a loss of $35.

BAJJERFAN

<< <i>If you buy a ($100 face value) bag of half dollars from the Mint for $135.00, can you write off a $35.00 loss after you search them and then decide to spend them?

This would be the reverse scenario of finding a cent in circulation and selling it for $100. Technically, your cost basis is $0.01 and your profit is $99.99, which would be taxable. >>



I don't think that you can write off the loss, but if the gain was taxable then the loss could be used to offset any comparable gains. You could reduce your taxable gain on the cent to $64.99

bronco2078

You mean the 2013 P & D half bag thats $139? Deposit 100 bucks of rolled anything and keep the half dollars .



what is there to search for in 2013 dated halfs?

OPA

Depositing them in a bank account does not constitute a tax loss. You will have to sell them to incur a loss.

BAJJERFAN

<< <i>You mean the 2013 P & D half bag thats $139? Deposit 100 bucks of rolled anything and keep the half dollars .



what is there to search for in 2013 dated halfs? >>



Nice ones?

bronco2078

<< <i>

<< <i>You mean the 2013 P & D half bag thats $139? Deposit 100 bucks of rolled anything and keep the half dollars .



what is there to search for in 2013 dated halfs? >>



Nice ones? >>





I thought he meant double dies .

Baley

No, you can't write off the $35 loss, that loss was 'consumed' by the searcher of the coins, who changed the nature of the asset from 'unopened and fresh' to 'searched and second-hand'

it was not a passive loss, the item was substantially changed, and the consumer enjoyed the entertainment and potential for finding something of value.

just my opinion, not tax advice, get that from your professional, but it don't pass my "red face" look-ya-in-the-eye test for deductions

cohodk

Im not an accountant either but i think the extra $35 would be considered goodwill and be treated accordingly.

derryb

It's really simple: If you have documentation that you lost money on an investment (if filing IRS Schedule D) or on a business transaction (if filing IRS Schedule C) you have a claimable tax loss.

jmski52

it was not a passive loss, the item was substantially changed, and the consumer enjoyed the entertainment and potential for finding something of value.

There is no test for my cent being substantially changed or entertainment value on my cent, but I would still be obligated to report a profit, would I not?


Depositing them in a bank account does not constitute a tax loss. You will have to sell them to incur a loss.

I tend to agree that an arms-length transaction is required, but isn't the bank a for-profit third party? (The receipt probably would have to be itemized, I s'pose.)

BAJJERFAN

<< <i>it was not a passive loss, the item was substantially changed, and the consumer enjoyed the entertainment and potential for finding something of value.

There is no test for my cent being substantially changed or entertainment value on my cent, but I would still be obligated to report a profit, would I not?


Depositing them in a bank account does not constitute a tax loss. You will have to sell them to incur a loss.

I tend to agree that an arms-length transaction is required, but isn't the bank a for-profit third party? (The receipt probably would have to be itemized, I s'pose.) >>



What practical difference would it make if you deposited the coins or the $100 bill that you got for them? Also the mint wasn't charging a $35 premium because there was something of extra value in the bag.

jmski52

What practical difference would it make if you deposited the coins or the $100 bill that you got for them?

No practical difference, but the IRS isn't bogged down with practical differences. I would identify the coins as a specific investment, from initial purchase to final disposal, as on Schedule D.


Also the mint wasn't charging a $35 premium because there was something of extra value in the bag.

Correct. And I didn't pay the premium because there was something of extra value in the bag, either. But my motives in buying and their motives in selling at a premium have no bearing on whether or not a tax loss applies.

BAJJERFAN

<< <i>What practical difference would it make if you deposited the coins or the $100 bill that you got for them?

No practical difference, but the IRS isn't bogged down with practical differences. I would identify the coins as a specific investment, from initial purchase to final disposal, as on Schedule D.


Also the mint wasn't charging a $35 premium because there was something of extra value in the bag.

Correct. And I didn't pay the premium because there was something of extra value in the bag, either. But my motives in buying and their motives in selling at a premium have no bearing on whether or not a tax loss applies. >>



Good thing this is theoretical. IMO you'd have to be crazy to actually include it with a tax return unless you were a business.

jmski52

Good thing this is theoretical. IMO you'd have to be crazy to actually include it with a tax return unless you were a business.

OPA was correct in his response. There's no requirement that I be a business in order to take such a loss, but the transaction does have to be finalized and with a third party. Schedule D would be fine, as long as I document both the buy and sell.

(I had been hoping that I could simply write of the loss and spend the coins or deposit them. That's not allowed, much to my discontent.)

Baley

Well, at least you probably won't make that trade again in the future!

BAJJERFAN

<< <i>Good thing this is theoretical. IMO you'd have to be crazy to actually include it with a tax return unless you were a business.

OPA was correct in his response. There's no requirement that I be a business in order to take such a loss, but the transaction does have to be finalized and with a third party. Schedule D would be fine, as long as I document both the buy and sell.

(I had been hoping that I could simply write of the loss and spend the coins or deposit them. That's not allowed, much to my discontent.) >>



Wasn't saying that one would need to be a business, only that a business is less likely to draw scrutiny from such a transaction than a non-business individual would.

tyler267

You can write off the loss, however, since coin collecting is a hobby you will be limited to the extent you have hobby gains, so without gains you can't write off the loss. I agree with the earlier advice about checking with your CPA.

BAJJERFAN

<< <i>You can write off the loss, however, since coin collecting is a hobby you will be limited to the extent you have hobby gains, so without gains you can't write off the loss. I agree with the earlier advice about checking with your CPA. >>



The OP was hoping that he could avoid the hassle of documenting the sale.

jmski52

Well, at least you probably won't make that trade again in the future!

I wouldn't quite say that either. I've been buying 2 or 3 bags of Kennedys from the Mint every year since 2002, and it's a hard habit to break. Starbucks and Taco Bell are going to get really tired of seeing me by this time next year, (unless you wanna buy some junk unc Kennedys at face).


since coin collecting is a hobby you will be limited to the extent you have hobby gains, so without gains you can't write off the loss

My Mint purchases are speculations for profit. It's not required that they be hobby purchases in order to offset my speculation gains with some speculation losses, is it?

Either way, it ain't gonna happen. Not worth the time or expense to follow through on selling so many marginal coins and then shipping them all out piecemeal or in bulk.

derryb

<< <i>My Mint purchases are speculations for profit. It's not required that they be hobby purchases in order to offset my speculation gains with some speculation losses, is it? >>


Call them "investments" and use Schedule D.