Selling expensive collection tax 2 2

[spidrvacc]

About 2 years ago yaall helped me with questions about selling my medium size collection. Was asking about tax issues of selling.  Kind of got out of comics. Wife out of work. Needed money  Was mostly bronze with value 24k and i got 50% value in a deal and had some decent paperwork for tax purposes. Now i collected back then with my older brother.now he collected silver and bronze . Alllot of the keys, xmen 1, AF 15, hulk 181  etc. These all absolutely blew up  .2 yesrs ago it was probably worth less then half , books are  mid grade. No high grade but all keys, ,  , i went to his house yesterday, looked at ebay sales and worth about 100k give or take .  He has zero paperwork on purchases. No ebay , Was 25-35 yesrs ago most got at shows, mail order ,etc . Hes going to sell maybe to guy who got mine. Atleast thats the plan .Doubt any cash since were talking maybe a collection worth 100k and maybe getting 60k.   I know accounting rules .(i was an accountant 15 years ago but bank accounting) 28% straight on profit of selling collectibles but what if you dont know what you paid? Or cant prove it.  Is it then you would be taxed 28% on the full value ?  So a $100k collection or even a $100k single comic book .you pay 28k in taxes? Or can you say maybe use  what the fair market value  is and use that for a loss?  So sold for 60k but worth 100k so a loss?

Just to add im just asking to see what anyone knows, opinions  just for me, he is going to sit down with an accountant before he does anything and rightfully so.   Not taking anyone opinion here as fact. Just curious  And hes stand up guy.not trying to cheat on taxes . He also a banker in ny. 

Hes getting ready to retire in a year or so and move to another state . Figure he will sell by end if year.  Or early next year so this isnt happening now.

 

Any thoughts on selling a collection or even s single book for a large sum to a dealer at say 50% of what its worth (not selling to a customer at a profit)  lets say 100k if you have no back up basis for cost?

 

Also do dealers pay large sums in cash?  Guy i got sold my books to was check only . 

 

Thanks

[Big Sweets]

I'm a Newbie in this and i have some of the same concerns you have . 

base on your relationship with the person ( which must be a very, very, very  long one

i would use wire transfer  checks can be cancel or we meet at his bank for that large amount

 

[The Lions Den]

On 5/1/2022 at 6:59 PM, spidrvacc said:

About 2 years ago yaall helped me with questions about selling my medium size collection. Was asking about tax issues of selling.  Kind of got out of comics. Wife out of work. Needed money  Was mostly bronze with value 24k and i got 50% value in a deal and had some decent paperwork for tax purposes. Now i collected back then with my older brother.now he collected silver and bronze . Alllot of the keys, xmen 1, AF 15, hulk 181  etc. These all absolutely blew up  .2 yesrs ago it was probably worth less then half , books are  mid grade. No high grade but all keys, ,  , i went to his house yesterday, looked at ebay sales and worth about 100k give or take .  He has zero paperwork on purchases. No ebay , Was 25-35 yesrs ago most got at shows, mail order ,etc . Hes going to sell maybe to guy who got mine. Atleast thats the plan .Doubt any cash since were talking maybe a collection worth 100k and maybe getting 60k.   I know accounting rules .(i was an accountant 15 years ago but bank accounting) 28% straight on profit of selling collectibles but what if you dont know what you paid? Or cant prove it.  Is it then you would be taxed 28% on the full value ?  So a $100k collection or even a $100k single comic book .you pay 28k in taxes? Or can you say maybe use  what the fair market value  is and use that for a loss?  So sold for 60k but worth 100k so a loss?

Just to add im just asking to see what anyone knows, opinions  just for me, he is going to sit down with an accountant before he does anything and rightfully so.   Not taking anyone opinion here as fact. Just curious  And hes stand up guy.not trying to cheat on taxes . He also a banker in ny. 

Hes getting ready to retire in a year or so and move to another state . Figure he will sell by end if year.  Or early next year so this isnt happening now.

 

Any thoughts on selling a collection or even s single book for a large sum to a dealer at say 50% of what its worth (not selling to a customer at a profit)  lets say 100k if you have no back up basis for cost?

 

Also do dealers pay large sums in cash?  Guy i got sold my books to was check only . 

 

Thanks

Start by making a simple spreadsheet of titles, issue numbers, dates acquired and sold, amounts paid and net gain on sales. If you don't have receipts to show what you paid, do your best to come up with a fair and reasonable estimate. 

And coffee...make sure you get some coffee.  

[KCOComics]

@Math Teacher has explained this well and i use his guidance when reconciling sales. 

 

My understanding is,  there is an expectation that you provide a reasonable accounting for your costs, in order to determine the gains.

Not necessarily receipts since so many of these transactions happened years and years ago. But a spreadsheet with costs, dates, costs for grading and shipping and everything else that may eat into your actual gain. 

I'm not an accountant and I haven't sold big ticket items, so take my advice for what it's worth. 

[csaag]

another option is, if he's willing to not sell them,  to will them to an heir which can enable the heir(s) to establish a cost basis of current FMV at the time the will is executed/estate taxes settled

 

[Math Teacher]

@KCOComics, I appreciate that you are using my advice. However, I am not an accountant either, so I would suggest you take my musing with a grain of salt.

Here's an article that explains the OP's situation:

https://www.investopedia.com/articles/personal-finance/061715/how-are-collectibles-taxed.asp

On 5/2/2022 at 6:48 AM, csaag said:

another option is, if he's willing to not sell them, to will them to an heir which can enable the heir(s) to establish a cost basis of current FMV at the time the will is executed/estate taxes settled

@csaag, this is exactly what I am planning to do. If the FMV of my collection is $200K when I pass away, then when my family takes possession of it, then the cost basis of my collection would then become $200K. If my family sells my collection relatively soon after I die (no one in my family is interested in my collection, other than its monetary value), they would have to pay little or no taxes on the sale. Again, this is just my understanding based on a lot of reading, so don't take it as the gospel.

I may sell smaller parts of my collection to help fund a larger purchase, but I won't be selling my copy of AF #15, because I paid $14.5K for it, and its current market value is $53K. My gain would $38.5K, which, as I understand it, would result in taxes close to $10.8K. I have no need to sell any of my major keys, as we will be able to live quite comfortably when we are both on social security, as both my wife and I have pensions (IPERS) that pay us a good amount of money. We also have a substantial amount of investments, which we have no plan on touching until required to by law. Yes, our investments used to be quite a bit more substantial, but we're in this for the long haul, so we plan on just waiting out this current downturn. Both our current financial advisor and our former financial advisor said that there has never been a five-year period where stocks didn't increase. I'm going to take them at their word, as I am too lazy to look this up. I can't believe that this is true during the Great Depression, but what do I know.

[jaybuck43]

On 5/1/2022 at 6:59 PM, spidrvacc said:

About 2 years ago yaall helped me with questions about selling my medium size collection. Was asking about tax issues of selling.  Kind of got out of comics. Wife out of work. Needed money  Was mostly bronze with value 24k and i got 50% value in a deal and had some decent paperwork for tax purposes. Now i collected back then with my older brother.now he collected silver and bronze . Alllot of the keys, xmen 1, AF 15, hulk 181  etc. These all absolutely blew up  .2 yesrs ago it was probably worth less then half , books are  mid grade. No high grade but all keys, ,  , i went to his house yesterday, looked at ebay sales and worth about 100k give or take .  He has zero paperwork on purchases. No ebay , Was 25-35 yesrs ago most got at shows, mail order ,etc . Hes going to sell maybe to guy who got mine. Atleast thats the plan .Doubt any cash since were talking maybe a collection worth 100k and maybe getting 60k.   I know accounting rules .(i was an accountant 15 years ago but bank accounting) 28% straight on profit of selling collectibles but what if you dont know what you paid? Or cant prove it.  Is it then you would be taxed 28% on the full value ?  So a $100k collection or even a $100k single comic book .you pay 28k in taxes? Or can you say maybe use  what the fair market value  is and use that for a loss?  So sold for 60k but worth 100k so a loss?

Just to add im just asking to see what anyone knows, opinions  just for me, he is going to sit down with an accountant before he does anything and rightfully so.   Not taking anyone opinion here as fact. Just curious  And hes stand up guy.not trying to cheat on taxes . He also a banker in ny. 

Hes getting ready to retire in a year or so and move to another state . Figure he will sell by end if year.  Or early next year so this isnt happening now.

 

Any thoughts on selling a collection or even s single book for a large sum to a dealer at say 50% of what its worth (not selling to a customer at a profit)  lets say 100k if you have no back up basis for cost?

 

Also do dealers pay large sums in cash?  Guy i got sold my books to was check only . 

 

Thanks

Just because you got paid cash, doesn't mean you can avoid taxes.  So no point in taking a 50% loss to sell to a dealer.

The IRS doesn't require receipts.  The IRS requires documentation to back up your deduction.  Let's be real, if your brother has had this collection for more than 5 years, the gains are going to be so high on these books that the IRS isn't going to care whether you claimed you paid $3,000 for it or $3,500.  

Let's take Hulk 181 as an example.  You said they're mid grade at best, so let's assume VG/F raw, 5.0 graded.  5.0's are currently at around $4,500.  Overstreet Guide for FN in 2013 (so 9 years back) was $300.  So even if you want to claim he paid double guide on that purchase, and say it was $600, your appreciation is going to be about $4,000, so the tax bill on that book is going to be $1,120.  Rinse and repeat

So here's my advice, as others have said.  1) Make a spreadsheet of all the books he owns.  2) Determine roughly when he bought them (let's say 1992).  3) Go on eBay and purchase the corresponding Overstreet guide. 4) Assign a grade for each book.  5) Lookup and note the guide price for each book in your collection.  You'll set that as your acquisition price.  6) Do everything you can to lower your tax base.  If the books are raw, press and grade them (SAVE THOSE RECEIPTS).  Sell them through good auction houses like Heritage/CC/CL.  All of those fees are deducted from the hammer price.  So if your Hulk 181 sells for $4,500, but you paid $450 in auction fees and $110 in pressing and grading, then you would subtract $300 from $3,940, meaning your taxable gain would be $3,640 at 28%.  

Your brother almost assuredly would have no issue with this from the IRS.  If they did audit him for some reason, just hand them the spreadsheet, the copy of overstreet, and any receipts you have from other expenses.  Done and done.

[jaybuck43]

On 5/2/2022 at 8:56 AM, Math Teacher said:

@KCOComics, I appreciate that you are using my advice. However, I am not an accountant either, so I would suggest you take my musing with a grain of salt.

Here's an article that explains the OP's situation:

https://www.investopedia.com/articles/personal-finance/061715/how-are-collectibles-taxed.asp

@csaag, this is exactly what I am planning to do. If the FMV of my collection is $200K when I pass away, then when my family takes possession of it, then the cost basis of my collection would then become $200K. If my family sells my collection relatively soon after I die (no one in my family is interested in my collection, other than its monetary value), they would have to pay little or no taxes on the sale. Again, this is just my understanding based on a lot of reading, so don't take it as the gospel.

I may sell smaller parts of my collection to help fund a larger purchase, but I won't be selling my copy of AF #15, because I paid $14.5K for it, and its current market value is $53K. My gain would $38.5K, which, as I understand it, would result in taxes close to $10.8K. I have no need to sell any of my major keys, as we will be able to live quite comfortably when we are both on social security, as both my wife and I have pensions (IPERS) that pay us a good amount of money. We also have a substantial amount of investments, which we have no plan on touching until required to by law. Yes, our investments used to be quite a bit more substantial, but we're in this for the long haul, so we plan on just waiting out this current downturn. Both our current financial advisor and our former financial advisor said that there has never been a five-year period where stocks didn't increase. I'm going to take them at their word, as I am too lazy to look this up. I can't believe that this is true during the Great Depression, but what do I know.

Yes, this is correct. The FMV of an asset is based on the date of death for the inheritor.  BUT it's a double edged sword.  People focus on FEDERAL inheritance tax, but forget that six states have (a much lower threshold) inheritance tax.  So while your beneficiaries escape Federal tax on 11 or so million, depending on what state your estate is in, this stepped up FMV could hurt them MORE there.  So in NJ (where I live) spouse and children are exempt from inheritance tax, but brothers and sisters have to pay tax on more than $25,000 inherited.  So if your $200,000 collection is split equally amongst a brother, a sister and your 2 children, your two kids get $50,000 tax free, while your brother and sister get $25,000 tax free and then pay 11% on the next $25,000.  

[csaag]

On 5/2/2022 at 10:27 AM, jaybuck43 said:

Yes, this is correct. The FMV of an asset is based on the date of death for the inheritor.  BUT it's a double edged sword.  People focus on FEDERAL inheritance tax, but forget that six states have (a much lower threshold) inheritance tax.  So while your beneficiaries escape Federal tax on 11 or so million, depending on what state your estate is in, this stepped up FMV could hurt them MORE there.  So in NJ (where I live) spouse and children are exempt from inheritance tax, but brothers and sisters have to pay tax on more than $25,000 inherited.  So if your $200,000 collection is split equally amongst a brother, a sister and your 2 children, your two kids get $50,000 tax free, while your brother and sister get $25,000 tax free and then pay 11% on the next $25,000.  

right.  I'm in PA which has a 4.5% inheritance tax for direct heirs (12% siblings ; 15% other)  I work in Jersey so I'm always telling the older folks they should move to PA for retirement. 4.5% vs 28% makes it worth it  if I want to pass them along to the kids

[jaybuck43]

On 5/2/2022 at 10:46 AM, csaag said:

right.  I'm in PA which has a 4.5% inheritance tax for direct heirs (12% siblings ; 15% other)  I work in Jersey so I'm always telling the older folks they should move to PA for retirement. 4.5% vs 28% makes it worth it  if I want to pass them along to the kids

We repealed our estate tax and our inheritance tax only applies to non-children/spouses.  Even then, it maxes out at 16%.

[spidrvacc]

Thanks everyone. Appreciate you all. Just want to understand how it all works. Learn something. And yes he will seek an accountant when the time is right.  Thanks 

[SuperBird]

On 5/2/2022 at 9:46 AM, jaybuck43 said:

The IRS doesn't require receipts.  The IRS requires documentation to back up your deduction.  

Is there a source for this? As far as I know, the documentaion required *is* the reciept. 

Edited May 2, 2022 by SuperBird

[SuperBird]

FWIW, I would aim to get 85% of the value of whatever your selling. There are plenty of venues to do so. 

[jaybuck43]

On 5/2/2022 at 11:22 AM, SuperBird said:

Is there a source for this? As far as I know, the documentaion required *is* the reciept. 

Yes, the Cohen Rule dates back to 1930.  The expense just needs to be reasonable and credible, which the published values from Overstreet would validate to the sufficiency of the Auditor.  Also, let's be realistic, the chances of being audited on a collection like this would be very low due to the fact that even with receipts, almost all of the value has appreciated recently so there will be a high tax bill due.  More red flags would be tripped if he sold for $200,000 and paid next to nothing in taxes.

[Math Teacher]

On 5/2/2022 at 9:27 AM, jaybuck43 said:

Yes, this is correct. The FMV of an asset is based on the date of death for the inheritor.  BUT it's a double edged sword.  People focus on FEDERAL inheritance tax, but forget that six states have (a much lower threshold) inheritance tax.  So while your beneficiaries escape Federal tax on 11 or so million, depending on what state your estate is in, this stepped up FMV could hurt them MORE there.  So in NJ (where I live) spouse and children are exempt from inheritance tax, but brothers and sisters have to pay tax on more than $25,000 inherited.  So if your $200,000 collection is split equally amongst a brother, a sister and your 2 children, your two kids get $50,000 tax free, while your brother and sister get $25,000 tax free and then pay 11% on the next $25,000.  

None of my estate is going to my brothers and/or sister. My estate is for the benefit of my immediate family, which includes my wife, my son, and my daughter.

Here's an article that might shed some light on this issue: https://worldpopulationreview.com/state-rankings/states-with-no-estate-tax

[Math Teacher]

On 5/2/2022 at 10:22 AM, SuperBird said:

Is there a source for this? As far as I know, the documentaion required *is* the reciept. 

I think being required to have a receipt for each purchase is unrealistic. I bought my copy of ASM #1 in the summer of 1980. It was a 100% cash transaction, and the seller didn't give me a receipt. I'm not sure he would have done so even if I asked. Honestly, who keeps a receipt for 40+ years? I'm lucky when I can find a receipt from something I bought last week.

I remember reading a post (I don't know in which thread, which forum, and what date is was) where the poster stated that he basically stated the value of each book sold was more or less 50% of the sale value. I know that I have additional expenses regarding my comics. I have paid plenty of Ebay fees; even when I sell to someone here on the board, I pay for shipping. I sometimes pay to have them graded, and I have to heat and cool my house.

Edited May 2, 2022 by Math Teacher

[jaybuck43]

On 5/2/2022 at 6:38 PM, Math Teacher said:

I think being required to have a receipt for each purchase is unrealistic. I bought my copy of ASM #1 in the summer of 1980. It was a 100% cash transaction, and the seller didn't give me a receipt. I'm not sure he would have done so even if I asked. Honestly, who keeps a receipt for 40+ years? I'm lucky when I can find a receipt from something I bought last week.

I remember reading a post (I don't know in which thread, which forum, and what date is was) where the poster stated that he basically stated the value of each book sold was more or less 50% of the sale value. I know that I have additional expenses regarding my comics. I have paid plenty of Ebay fees; even when I sell to someone here on the board, I pay for shipping. I sometimes pay to have them graded, and I have to heat and cool my house.

Lol yea… don’t claim those  I had a friend that had to represent a client who tried to deduct his mortgage as a valid deduction because “hey I had to keep the paintings somewhere”

[KCOComics]

On 5/2/2022 at 6:35 PM, Math Teacher said:

None of my estate is going to my brothers and/or sister. My estate is for the benefit of my immediate family, which includes my wife, my son, and my daughter. And my AF15 to my internet friend Kevin who I never met in person.  

 

Here's an article that might shed some light on this issue: https://worldpopulationreview.com/state-rankings/states-with-no-estate-tax

I appreciate the gesture, but your kind of sticking me with a tax bill....oh well, I guess it's my burden to carry. 

[spidrvacc]

Have a question since someone mentioned you still have to report cash sales.and before anyone jumps on me , i got paid by check and my sale was all by the book and my brother is a legit guy. Hes also buy the book. Again just a question i have.

I always assumed that the reason that the buyers in comic book adds  put we  pay " cash"  on the spot in there buying adds  ( go to overstreet adds right now) was so you could decide not report it if you wanted to be like that.   The place i sold mine to had that in there add  " cash paid on the spot"but  i never asked for cash  and i got a paid by check.was i always wrong in ny thinking?  

[KCOComics]

On 5/2/2022 at 9:39 PM, spidrvacc said:

Have a question since someone mentioned you still have to report cash sales.and before anyone jumps on me , i got paid by check and my sale was all by the book and my brother is a legit guy. Hes also buy the book. Again just a question i have.

I always assumed that the reason that the buyers in comic book adds  put we  pay " cash"  on the spot in there buying adds  ( go to overstreet adds right now) was so you could decide not report it if you wanted to be like that.   The place i sold mine to had that in there add  " cash paid on the spot"but  i never asked for cash  and i got a paid by check.was i always wrong in ny thinking?  

 

Legally, you are responsible for paying taxes on the gains no matter what. Cash, check, credit, doesn't matter. 

Cash makes the paper trail harder for the IRS, but it doesn't change the law.