Capital Gains?
cameron12x
Posts: 1,384 ✭✭✭
I'm a hobbyist coin collector, but say for example that I buy a coin for $500 and sell it for $1000. I then use the proceeds from that sale to fund the purchase of other coins.
Do I have to show a $500 capital gain on my state or federal income tax?
Do I have to show a $500 capital gain on my state or federal income tax?
0
Comments
Edited to add:
If you held the coin for 12 months or longer, then you can elect long-term capital gains treatment. If you held it for less than a year, its a short-term gain and therefore treated as ordinary income and you have to pay your regular marginal rate.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
<< <i>not giving you tax advice as you should talk to your tax preparer, but you should note that gains on sales of coins may be treated as gains on collectibles which can be taxed at different gains rates than other investments. >>
Correct-a-mundo...Listing the word "Coin" on a schedule D as a long-term capital gain is asking for an audit.
COMPLETE KENNEDY VARIETY SET, CIRCULATION STRIKES AND PROOFS
1964 MINT SET
Proud recipient of Y.S. Award on 07/26/08.
If you understand what is coming, then you can duck. If not, then you get sucker-punched. - Martin Armstrong
<< <i>Not if you plan on going to jail anyway. Otherwise it would be a good idea. >>
Whouldn't that make your planned stay a little longer ?
Correct-a-mundo...Listing the word "Coin" on a schedule D as a long-term capital gain is asking for an audit.
Also not giving you tax advice, but here's a general statement from IRS Publication 17:
"Gold, silver, stamps, coins, gems, etc. These are capital assets except when they are held for sale by a dealer.
Any gain or loss you have from their sale or trade generally is a capital gain or loss."
<< <i>using the profit to buy more coins is irrelevent. A sale was made and a profit was realized - all uncle same cares about. >>
not necessarily, if you do a Section 1031 exchange it would be very relevant, though you would have to follow the procedures to qualify for a 1031 exchange, generally wouldn't be worthwhile I would think unless we're talking about a very substantial coin transaction. i've seen 1031 exchanges pass review for other types of collectibles (value at six figures and up) and I see no reason why a coin exchange wouldn't qualify as well, as long as the 1031 rules are followed.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
<< <i>I'm a hobbyist coin collecter, but say for example that I buy a coin for $500 and sell it for $1000. I then use the proceeds from that sale to fund the purchase of other coins.
Do I have to show a $500 capital gain on my state or federal income tax? >>
As a hobbyist, I wouldn't be thinking capital gains... I'd be thinking "other income".
``https://ebay.us/m/KxolR5
<< <i>Also not giving you tax advice, but here's a general statement from IRS Publication 17:
"Gold, silver, stamps, coins, gems, etc. These are capital assets except when they are held for sale by a dealer.
Any gain or loss you have from their sale or trade generally is a capital gain or loss." >>
You missed the point...and the words "long-term". Yes, coins are capital assets. However, in general, collectibles (eg stamps, antiques, gems, and most coins) are taxed at the maximum capital gain rate of 28% even if held more than 12 months. (Code Sec 1 (h) (4) (A) (i)). The comment illini420 made is absolutely correct...long-term capital gains on coins are generally taxed at a higher rate than other long-term capital gains. Try listing coins (or other collectibles) on Sch D and computing the tax at regular long-term gain rates. I've seen the results of this many times over the last 25 years.
COMPLETE KENNEDY VARIETY SET, CIRCULATION STRIKES AND PROOFS
1964 MINT SET
for collectors (not dealers) and sale of personal property, be it coins, furniture or art, is a Capital Gain,
However, here in Canada, a Capital Gain is only claimed on a sale of $1000 or over.
Anything below this, and the cost is assumed to be the same as the selling price.
Anything above this, and the cost is $1000 unless you have a bill showing otherwise.
Example:
Coin (A) from personal collection sold for $850. Then there is 0 Capital Gain as cost is assumed to be $850.
Coin (B) from collection sold for $1600 (without a record of cost). Then the Capital Gain is $1600 - $1000 = $600
In Canada, we pay 50% on Capital Gains, so the amount that tax is owed would be on a Capital Gain of $300.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
And to think I was going to move to Canada for they're wonderful healthcare!!!
<< <i>In Canada, we pay 50% on Capital Gains,
And to think I was going to move to Canada for they're wonderful healthcare!!!
Sounds more like criminal gains as far as the Canadian Guvmint is concerned.
... under already enacted law, the current proposal for putting the law into effect starting with transactions in calendar year 2011 ...
IRS Issues Proposed Regulations on Reporting Requirement for Payment Card and Third-Party Payment Transactions
proposed 1099-K from the IRS
debit card, credit card, PayPal, and other transaction processing companies may have to report transaction totals
but I see here:
<< <i>Section 6050W(e) provides an exception for de minimis payments by third party
settlement organizations to certain participating payees. Under the proposed
regulations, a third party settlement organization must report payments made to a
participating payee only if its aggregate payments to that payee from third party network
transactions exceed $20,000 and the aggregate number of those transactions with the
payee exceeds 200. Several commenters requested that the exception for de minimis
payments be extended to include payments in settlement of payment card transactions.
The proposed regulations do not adopt this suggestion. Further comments are
requested on the application of the de minimis rule exception, including whether the
exception should be mandatory or voluntary.
Section 6050W(d)(1)(A) provides that participating payee means: (i) in the case
of a payment card transaction, any person who accepts a payment card as payment;
and (ii) in the case of a third party network transaction, any person who accepts
payment from a third party settlement organization in settlement of such transaction.
Under section 6050W(d)(1)(B), the term participating payee excludes any person with a
foreign address, except as the Secretary may provide. The proposed regulations
provide that a payment settlement entity that is a person described as a U.S. payor or
U.S. middleman in §1.6049-5(c)(5) is not required to report payments to participating
payees with a foreign address as long as, prior to payment, the payee has provided the
payment settlement entity with documentation upon which the payment settlement entity
may rely to treat the payment as made to a foreign person in accordance with §1.1441-
1(e)(1)(ii). By contrast, a payment settlement entity that is not a person described as a
U.S. payor or U.S. middleman in §1.6049-5(c)(5) is not required to report payments to
participating payees that do not have a United States address as long as the payment
settlement entity neither knows nor has reason to know that the participating payee is a
United States person. For purposes of this section, foreign address means any address
that is not within the United States, as defined in section 7701(a)(9) (the States and the
District of Columbia). United States address means any address that is within the
United States. >>
<< <i>Stored-Value Cards and Gift Cards
The proposed regulations provide that the term “stored-value card” means any
card with a prepaid value, including any gift card. Under the proposed regulations, a
stored-value card is not a payment card within the meaning of section 6050W when the
card is accepted as payment by a person who is related to the issuer of the card. Under
these circumstances, the transaction is not a payment card transaction within the
meaning of section 6050W and thus not a reportable transaction. However, if the
stored-value card itself is purchased with a payment card issued by an unrelated entity,
that purchase transaction is reportable under section 6050W.
In contrast, a stored-value card that a network of persons unrelated to the issuer
has agreed to accept as payment (such as a stored-value card issued by a college that
may be used at various local merchants unrelated to the college) is a payment card
when it is accepted as payment in a transaction with an unrelated person. Under these
circumstances, the transaction is a payment card transaction within the meaning of
section 6050W that is reportable by the payment settlement entity. Use of a storedvalue
card within a network of both related persons and unrelated persons is a
reportable transaction only when it is accepted as payment by an unrelated person. For
purposes of this section, unrelated means any person who is not related within the
meaning of section 267(b) (providing a list of relationships), including the application of
section 267(c) and (e)(3) (providing rules relating to constructive ownership), or section
707(b)(1) (relationships with partnerships). >>
Do you need three guesses as to how they fund it?
Can't you trade (buy/sell) stocks with an IRA account and defer the taxes until you actually take the money out?
<< <i>It's too bad that there is not a financial instrument such as a self-funded Roth 401K plan or IRA based on coins instead of securities...
>>
That would work very well for the 10-20% of collectors that buy the right coins, not so well for everyone else.
<< <i>
<< <i>In Canada, we pay 50% on Capital Gains,
And to think I was going to move to Canada for they're wonderful healthcare!!!
Sounds more like criminal gains as far as the Canadian Guvmint is concerned. >>
Sorry guys, I think you misunderstood.
When you fill out your Canadian income tax return, you only put down 50% of your total Capital Gain. You're then taxed on that amount, usually about 20% (depending on your tax bracket).
as an example:
Sold coin for $1600.
The capital gain is $1600 - $1000 = $600.
This $600 amount is multiplied by 50% for your income tax return.
You input $300 as your tax return CG.
Then you're taxed on this amount.
I want to make it clear that we're not taxed 50% on Capital gains.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>It's too bad that there is not a financial instrument such as a self-funded Roth 401K plan or IRA based on coins instead of securities...
Can't you trade (buy/sell) stocks with an IRA account and defer the taxes until you actually take the money out? >>
consult your financial advisor.
bullion is allowed under certain circumstances, and there are ETFs.
collectibles? I'm not sure. There are rules regarding what is allowed and what is not. I've read real estate is allowed
not necessarily, if you do a Section 1031 exchange it would be very relevant, though you would have to follow the procedures to qualify for a 1031 exchange, generally wouldn't be worthwhile I would think unless we're talking about a very substantial coin transaction. i've seen 1031 exchanges pass review for other types of collectibles (value at six figures and up) and I see no reason why a coin exchange wouldn't qualify as well, as long as the 1031 rules are followed
You would have a very hard time justifying a like kind exchange when it comes to numismatic coins. The IRS is very liberal with like kind exchanges when it comes to real estate. However, no serious collector would make the argument that trading a 1908 S IHC in PC 5 RB plus cash for an 09 S IHC in 5 RD is a like kind exchange.
"Seu cabra da peste,
"Sou Mangueira......."
<< <i>using the profit to buy more coins is irrelevent. A sale was made and a profit was realized - all uncle same cares about. >>
not necessarily, if you do a Section 1031 exchange it would be very relevant, though you would have to follow the procedures to qualify for a 1031 exchange, generally wouldn't be worthwhile I would think unless we're talking about a very substantial coin transaction. i've seen 1031 exchanges pass review for other types of collectibles (value at six figures and up) and I see no reason why a coin exchange wouldn't qualify as well, as long as the 1031 rules are followed
You would have a very hard time justifying a like kind exchange when it comes to numismatic coins. The IRS is very liberal with like kind exchanges when it comes to real estate. However, no serious collector would make the argument that trading a 1908 S IHC in PC 5 RB plus cash for an 09 S IHC in 5 RD is a like kind exchange. >>
I disagree and have seen collectors of fine art successfully go through audit involving a 1031 one painting plus some cash for another more valuable painting (by an entirely different artist).
People do 1031 exchanges of like-kind property everyday. though 1031s are most common involving real estate exchanges, it's fair to say that every piece of real estate is unique. People regularly exchange a "B" rental property for an "A" rental property as they upgrade their real estate holdings. Similarily, why wouldn't a coin investor who follows the 1031 rules be able to upgrade their 65RB for a 65RD?? Just because one property is in better condition shouldn't factor in the like-kind analysis.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
<< <i>
<< <i>It's too bad that there is not a financial instrument such as a self-funded Roth 401K plan or IRA based on coins instead of securities...
>>
That would work very well for the 10-20% of collectors that buy the right coins, not so well for everyone else. >>
Agreed. It would be nice to at least to have such an option available.
Based on what others have written, it may be worthwhile for some to review/research the existing 1031 exchange tax laws in greater detail.
People do 1031 exchanges of like-kind property everyday. though 1031s are most common involving real estate exchanges, it's fair to say that every piece of real estate is unique. People regularly exchange a "B" rental property for an "A" rental property as they upgrade their real estate holdings. Similarily, why wouldn't a coin investor who follows the 1031 rules be able to upgrade their 65RB for a 65RD?? Just because one property is in better condition shouldn't factor in the like-kind analysis.
You can disagree, but I think you're wrong. I have many years of experience dealing with like kind exchanges. The Code Section, cases, Q and A with the IRS are all very clear that this Code Section takes a very liberal view of like kind exchanges of real property. The fact that every piece of real estate is unique is irrelevant to IRC Section 1031. Your comment re rental property is correct, but it has NOTHING to do with personal property.
The standard is much more rigorous with personal property. You can exchange a Peterbilt with a wrecker for a newer Pete (or a Freightliner) of a different year with a wrecker and add some cash. This is because both of these vehicles perform the same function.
If you want to do a like kind exchange and try to convince the IRS that, say a BN Unc Large Cent plus cash is the same as a RD Unc. Large Cent, good luck. I haven't researched the matter thoroughly, but I doubt you'll find any case law or anything else, for that matter, in the law, which supports that position. If you want to stick you neck out on this, it's on your dime, not mine. I wouldn't touch it.
"Seu cabra da peste,
"Sou Mangueira......."
<< <i>It would be interesting to see "how many times" a coin is taxed throughout its transaction history. I suppose the same thing could be said for just about any piece of personal property. It's too bad they can't be treated like securities under the umbrella of a retirement account. >>
I'd bet that most coins have rarely been taxed.
<< <i>
<< <i>It would be interesting to see "how many times" a coin is taxed throughout its transaction history. I suppose the same thing could be said for just about any piece of personal property. It's too bad they can't be treated like securities under the umbrella of a retirement account. >>
I'd bet that most coins have rarely been taxed. >>
I wonder how dealers feel about that. For the hobbyist, it may also have some ramifications.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
<< <i>
<< <i>
<< <i>It would be interesting to see "how many times" a coin is taxed throughout its transaction history. I suppose the same thing could be said for just about any piece of personal property. It's too bad they can't be treated like securities under the umbrella of a retirement account. >>
I'd bet that most coins have rarely been taxed. >>
I wonder how dealers feel about that. For the hobbyist, it may also have some ramifications. >>
I didn't intend to include dealer sales, but I prolly shudda stated so.
<< <i>
<< <i>
<< <i>In Canada, we pay 50% on Capital Gains,
And to think I was going to move to Canada for they're wonderful healthcare!!!
Sounds more like criminal gains as far as the Canadian Guvmint is concerned. >>
Sorry guys, I think you misunderstood.
When you fill out your Canadian income tax return, you only put down 50% of your total Capital Gain. You're then taxed on that amount, usually about 20% (depending on your tax bracket).
as an example:
Sold coin for $1600.
The capital gain is $1600 - $1000 = $600.
This $600 amount is multiplied by 50% for your income tax return.
You input $300 as your tax return CG.
Then you're taxed on this amount.
I want to make it clear that we're not taxed 50% on Capital gains. >>
Which means that here in Ontario, Canada ... I'd pay a maximum capital gain of 23% on coin profits.
My World Coin Type Set
<< <i>I disagree and have seen collectors of fine art successfully go through audit involving a 1031 one painting plus some cash for another more valuable painting (by an entirely different artist).
People do 1031 exchanges of like-kind property everyday. though 1031s are most common involving real estate exchanges, it's fair to say that every piece of real estate is unique. People regularly exchange a "B" rental property for an "A" rental property as they upgrade their real estate holdings. Similarily, why wouldn't a coin investor who follows the 1031 rules be able to upgrade their 65RB for a 65RD?? Just because one property is in better condition shouldn't factor in the like-kind analysis.
You can disagree, but I think you're wrong. I have many years of experience dealing with like kind exchanges. The Code Section, cases, Q and A with the IRS are all very clear that this Code Section takes a very liberal view of like kind exchanges of real property. The fact that every piece of real estate is unique is irrelevant to IRC Section 1031. Your comment re rental property is correct, but it has NOTHING to do with personal property.
The standard is much more rigorous with personal property. You can exchange a Peterbilt with a wrecker for a newer Pete (or a Freightliner) of a different year with a wrecker and add some cash. This is because both of these vehicles perform the same function.
If you want to do a like kind exchange and try to convince the IRS that, say a BN Unc Large Cent plus cash is the same as a RD Unc. Large Cent, good luck. I haven't researched the matter thoroughly, but I doubt you'll find any case law or anything else, for that matter, in the law, which supports that position. If you want to stick you neck out on this, it's on your dime, not mine. I wouldn't touch it. >>
What do CPA's do during their lunch hour? Apparently we argue with each other about taxation of coin transactions.
Anyway...I took a look at a few of our research materials, and couldn't really find any good support for how one determines "Like Class" for a coin. I'd personally be comfortable taking the position that a Lincoln Cent in VF is Like-kind with a Lincoln Cent in MS; as the regulations specifically say that "grade or condition" don't play into determining whether property is of a like-kind. Although I'm sure the writers didn't intend those terms in the same way we understand it in the coin world; it's not without bearing that they are terms we're all very familiar with as it relates to coins.
A key element of IRC Section 1031 is that the property must be held for use in a trade/business (non-inventory property) or held for investment. The rules are clear that personal property held for investment can qualify, but when that personal property is non-depreciable property the determination of like-kind status becomes a more subjective. In reference to the Artwork issue raised, the IRS has determined that you couldn't exchange a painting for a sculpture, but similar "types" (painting for painting) could be exchanged. This could be extended to say that you are able to trade coin for coin, but not collectibles of differing types (baseball card for coin).
I did find some specific references to how the IRS had determined that BULLION type coins of one country could trade for similar BULLION type coins of another country and be considered like-kind. However, there was also reference that gold BULLION coins and silver BULLION coins were not considered to be like kind because gold and silver had intrinsically different uses.
In my opinion, trading a Lincoln Cent for a Washington Quarter falls somewhere between these two examples. I'd be very comfortable if we were conducting an exchange within the same series/type (Lincoln Cent for Lincoln Cent). As to whether any coin is considered like with another coin or not, I don't believe that would be a huge stretch, but I'd want to make sure I had my ducks in a row as far as documenting how I determined that the property was indeed like-kind.
I think I'd be willing to take a shot at it...making sure my client was aware that there was not a definitive support for the position and we'd have to argue our position if challenged.
<< <i>If you sell a coin to a friend and he pays you in cash, do you still need to pay taxes on any profit?
Whether the transaction occurred in cash, beans, or seashells; whether it is reported to the IRS or not has absolutely no bearing on whether the transaction is a taxable event.
So...for instance...let's just say you have $30,000 in capital loss carryovers [from stock losses], I'm assuming this amount can be used to offset any gains on coins?
<< <i>So...for instance...let's just say you have $30,000 in capital loss carryovers [from stock losses], I'm assuming this amount can be used to offset any gains on coins? >>
Yes, it can. However, long-term and short-term losses first offset gains of similar term. Then they offset the 28% collectibles gain, 25% 1250 gains, and then 15% long-term capital gains.
<<Yes, it can. However, long-term and short-term losses first offset gains of similar term. Then they offset the 28% collectibles gain, 25% 1250 gains, and then 15% long-term capital gains. >>
Oh but not to fear...thanks to the thieves on Wall Street I have capital losses of all sizes and description!
IRS to Track Online Sellers' Payment Transactions Beginning Next Year
<< <i>There seems to be a somewhat related thread:
IRS to Track Online Sellers' Payment Transactions Beginning Next Year >>
In my feeble attempt to bring things within the parameters of the terms of service laid out for us on the U.S. Coin forum, I would humbly present 1 PCGS graded MS 65 Walking Liberty. 1946 S
It could get a gold sticker, or a green one.
Guess the taxes on the profits if it gets a sticker and sells
``https://ebay.us/m/KxolR5