Sdcc photos 1 1

[PhilipB2k17]

I have a question on taxes. If you buy a piece of art for cheap. then sell it for a lot of money, you make a capital gain on it. Do OA collectors who come out ahead on net gain on an annual basis report the gain to the IRS? Or is this all under the table?

[delekkerste]

16 minutes ago, comix4fun said:

I had no idea you were a wrist shaver. 

The photo is not of me, but, my wrists are naturally less hairy than that guy's anyway.  

[comix4fun]

1 minute ago, delekkerste said:

The photo is not of me, but, my wrists are naturally less hairy than that guy's anyway.  

Keep denying it....I swear you were wearing those bangles at dinner Saturday. 

[delekkerste]

7 minutes ago, PhilipB2k17 said:

On big ticket items, do you put down a deposit, and execute a sales contract? 

It's all verbal (in my experience).  Have never executed any sort of written contract before.  I'm sure some dealers do take deposits at shows to hold art, though, in my experience, it's not been required (might not be the case if you're an unknown quantity, though).  

[zhamlau]

Ops, wrong reply lol. Thought you asking about what rate you pay.

Edited July 26, 2017 by zhamlau

[Kevin76]

1 hour ago, delekkerste said:

Off to buy comic art at the SDCC! 

I guess money really does buy happiness   

[cstojano]

1 hour ago, PhilipB2k17 said:

I have a question on taxes. If you buy a piece of art for cheap. then sell it for a lot of money, you make a capital gain on it. Do OA collectors who come out ahead on net gain on an annual basis report the gain to the IRS? Or is this all under the table?

Crickets...

 

People won't comment in the specific but yes all gains are to be reported, and I believe taxed at a worse rate than income and "normal" cap gains . TPTB don't like people spending money on art and baubles that increase in value.

 

Edit: you also used the phrase "on an annual basis". I am not sure you should assume it works that way either (surely there is someone here who knows the rules) because there may be limits on the amount of loss claimed. For example, I could see someone saying they made 10k on this sale, and lost 10k on another sale so my annual net is 0. But this is logical. I could also see a situation where the profit of 10k is considered somewhat separate from the loss of 10k because this isn't a business you are participating in but a hobby. The strategy I use is to collect what I like, which is fringe as hell, to ensure I beg people to break even on anything that I sell.

Edited July 26, 2017 by cstojano

[delekkerste]

4 minutes ago, cstojano said:

Crickets...

 

People won't comment in the specific but yes all gains are to be reported, and I believe taxed at a worse rate than income and "normal" cap gains . TPTB don't like people spending money on art and baubles that increase in value.

Yes, all gains are to be reported.

Gains on art held less than 1 year is taxed at your ordinary income rate.

Gains on art held >1 year is taxed at 28% at the Federal level.

You are also taxed on the gain at the state/local level in 41 out of 50 states.  Most people forget this, and it can be significant.  

Word to the wise:  breaking payments up into sub-$10K increments will not escape the IRS' detection if you are audited.  The first thing they will do is look at all of the inflows into your various accounts, and you better have reported every dollar (or be able to explain why you didn't have to, e.g., gifts under the annual limit, etc.)  As my accountant says:  if it hits your account, report it. 

Thus endeth the lesson.  

[stinkininkin]

4 minutes ago, delekkerste said:

Yes, all gains are to be reported.

Gains on art held less than 1 year is taxed at your ordinary income rate.

Gains on art held >1 year is taxed at 28% at the Federal level.

You are also taxed on the gain at the state/local level in 41 out of 50 states.  Most people forget this, and it can be significant.  

Word to the wise:  breaking payments up into sub-$10K increments will not escape the IRS' detection if you are audited.  The first thing they will do is look at all of the inflows into your various accounts, and you better have reported every dollar (or be able to explain why you didn't have to, e.g., gifts under the annual limit, etc.)  As my accountant says:  if it hits your account, report it. 

Thus endeth the lesson.  

EXCELLENT advice.  So not worth effing around with this stuff.  You'll be SOOOOOOOOO sorry.

Scott

[PhilipB2k17]

22 minutes ago, stinkininkin said:

EXCELLENT advice.  So not worth effing around with this stuff.  You'll be SOOOOOOOOO sorry.

Scott

This explains why some people might incorporate, or become subchapter S corporations, to buy and sell art via their "business," so they can report losses and gains, and be taxed at the corporate rate.

[cstojano]

29 minutes ago, delekkerste said:

Yes, all gains are to be reported.

Gains on art held less than 1 year is taxed at your ordinary income rate.

Gains on art held >1 year is taxed at 28% at the Federal level.

You are also taxed on the gain at the state/local level in 41 out of 50 states.  Most people forget this, and it can be significant.  

Word to the wise:  breaking payments up into sub-$10K increments will not escape the IRS' detection if you are audited.  The first thing they will do is look at all of the inflows into your various accounts, and you better have reported every dollar (or be able to explain why you didn't have to, e.g., gifts under the annual limit, etc.)  As my accountant says:  if it hits your account, report it. 

Thus endeth the lesson.  

And let's not forgot use tax. I learned that lesson the hard way having received a tax bill+penalties+interest three years after leaving a certain state known for its poor fiscal health.

[delekkerste]

1 minute ago, PhilipB2k17 said:

This explains why some people might incorporate, or become subchapter S corporations, to buy and sell art via their "business," so they can report losses and gains, and be taxed at the corporate rate.

So, I actually looked into this at one point (which later became the source of some confusion in my Felix Comic Art podcast).  The benefit to running an art business is:  sales tax exemption and ability to deduct many expenses as a business that are not deductible as a hobby.  The downside is that the corporate tax rate is higher than the collectibles capital gains tax rate (if you have enough expenses, though, your effective rate could end up being lower).  But, here's the killer:  you have to pay self-employment tax.

I concluded that it wasn't worth it.

[PhilipB2k17]

6 minutes ago, delekkerste said:

So, I actually looked into this at one point (which later became the source of some confusion in my Felix Comic Art podcast).  The benefit to running an art business is:  sales tax exemption and ability to deduct many expenses as a business that are not deductible as a hobby.  The downside is that the corporate tax rate is higher than the collectibles capital gains tax rate (if you have enough expenses, though, your effective rate could end up being lower).  But, here's the killer:  you have to pay self-employment tax.

I concluded that it wasn't worth it.

My research on this also shows that you can declare a capital loss on the sale of  collectible art, only if you do not benefit from personal use of it. So, if you hang it up on your wall, you can't claim the capital loss if you sell it. (No gain to report and get taxed on either, of course). But, if you store them in files and keep inventory, you may be able to claim a capital loss.

In any case, consult an accountant or a tax attorney before making a decision to sell your art! And keep good records!

Edited July 26, 2017 by PhilipB2k17

[artdealer]

3 hours ago, Kevin76 said:

checks can be safe if you've known the person awhile, but then again, anyone can write a check for any amount and walk away with their purchase. 

Everyone I took a check from I've known for years.

In 40 years of exhibiting at San Diego, I've never had anyone bounce a check.

I don't do wire transfers if I haven't done business with the client in the past.

[vodou]

1 hour ago, delekkerste said:

So, I actually looked into this at one point (which later became the source of some confusion in my Felix Comic Art podcast).  The benefit to running an art business is:  sales tax exemption and ability to deduct many expenses as a business that are not deductible as a hobby.  The downside is that the corporate tax rate is higher than the collectibles capital gains tax rate (if you have enough expenses, though, your effective rate could end up being lower).  But, here's the killer:  you have to pay self-employment tax.

I concluded that it wasn't worth it.

 

2 hours ago, stinkininkin said:

EXCELLENT advice.  So not worth effing around with this stuff.  You'll be SOOOOOOOOO sorry.

Scott

Correct Scott. Unfortunately this hobby, all hobbies, are rife with under-reporting and terrible record-keeping. The IRS isn't burdened with either of those concerns though, if you sell something (or trade -never forget that 'barter' is taxable too!) and cannot show an acceptable cost basis they are happy (and make the assumption too) that you have no basis (zero cost) and the entire proceeds of the sale are taxable (as 'gain'). And then the penalties and interest are calculated, not to mention possible criminal charges if the number is big enough or the number of instances of under reporting numerous enough.

Question: What's the cost basis on Ditko's ASM #10 complete story that sold those many years ago at Heritage? Talk about washing your laundry...(Ozark reference.)

[Kevin76]

Best to do a cash only deal when selling high end art. Don't make cash deposits of 10K+ at once or make 3333.33 deposits, 3 months in a row either. 

[vodou]

1 hour ago, Kevin76 said:

Best to do a cash only deal when selling high end art. Don't make cash deposits of 10K+ at once or make 3333.33 deposits, 3 months in a row either. 

Just a suggestion but I'd stay away from even recommending things like taking only cash and ways to avoid getting caught structuring or layering...the whole subject is a croc swamp of potential legal woes. People want to circumvent, fine, but let them work it out for themselves.

[Kevin76]

1 hour ago, vodou said:

Just a suggestion but I'd stay away from even recommending things like taking only cash and ways to avoid getting caught structuring or layering...the whole subject is a croc swamp of potential legal woes. People want to circumvent, fine, but let them work it out for themselves.

Frazetta's wife would only take cash 

Just sayin... 

[Brian Peck]

9 hours ago, PhilipB2k17 said:

On big ticket items, do you put down a deposit, and execute a sales contract? 

I don't usually buy art with 5 figure price tags at cons, most pieces are usually under $5K. I have only bought one high end item at SDCC a few years ago. I put a downpayment on the piece in cash, the dealer and I have known each other for years. We agreed on when I would pay him the balance, which was all in cash. I will admit being a bit nervous when it came to carrying the cash when I finally paid off the art. 

Your reputation in the comic art field is one of the most important things, thats helps alot when working out time payments or other details in a deal.

[Thawk]

On 7/25/2017 at 11:15 AM, stinkininkin said:

Thanks for the pictures guys!  I missed almost all the art this year since I'm so busy at the show, and this has unfortunately become the norm for me.  Hey Gene (or anyone else), what was the price for BWS Conan saga #1 cover?  What a great piece of art.  I think I like that period of BWS better than much of his early Conan stuff (pre Conan 19), and the larger size and brilliant color work makes it no contest (for me).

I had one pickup at the show, the ROLEX GMT "The Batman" and even though it's not art in the strictest sense, Rolex collectors consider these timepieces as works of art, and this one is the Rolex Batman, so I'm still somewhat on topic.  Jim Lee blew my mind and put me into a state of shock by presenting it to me at his Spotlight panel in recognition of the 30 years of friendship and collaboration we've shared (we met in 1987).  I'm still buzzing about it days later.  Anyone who knows Jim knows this is who he is and what he does and I am forever grateful  that we crossed paths all those years ago.

Scott

 

It was really fun to see you celebrated Scott.  That was the highlight of the panel that day.  Congrats!