Quick Question RE this 1099 issue that seems to be geared to flipers... books that have been purchased 30 years ago ? 2 2

[WEBHEAD]

It just seems that if you picked a book off the rack for 12 cents that you owned for 30 + years and  it suddenly has value.  how would the impact for  an investment of 12 cents over 30 years and now might be worth less say $200 what might the 1099?  Just asking a question I'm sure many of us have books like that 

Thanks in advance

 

Webhead * collecting since 1950's

[revat]

Start w form 8949

Otherwise contact a qualified tax preparer 

people here are generally hesitant to give the wrong tax advice, since so many situations are different.  
 

People can’t really say anything other publicly other than, “make a good faith effort to fill out the forms and understand the stuff to your best of your ability”

[DougC]

speaking from a purely hypothetical and very anti tax stance...

I don't self report anything that I have not been personally issued a correct 1099 for, by someone else.

 

Your moral position on what you owe the government and are willing to pay is between you and your accountant.

[Lightning55]

The short answer:  If you sell a book for $200 that you paid 12 cents for, you owe taxes on the $199.88 income.

The long answer:  While the above is true, it may be mitigated by offsets such as possible overhead expenses - storage, grading, restoration, shipping, etc. resulting in a lower tax exposure.

Super short answer: Consult a tax professional.

*******************************

A 1099 is a reporting document you might receive from a 3rd party, such as a marketplace or consignee. A copy goes to the IRS and the applicable state authority. It alerts them that you made a sale.  Probably an involved party made the sale for you, and since they don't want to pay taxes on the sale proceeds that they have forwarded to you, they fill out a 1099 to indicate who should be paying the taxes on the sale.

If you make a sale directly, there is no 1099, but you are still responsible for the payment of taxes on any profit (as are we all).

 

[Nick Furious]

On 6/9/2024 at 7:59 PM, WEBHEAD said:

t just seems that if you picked a book off the rack for 12 cents that you owned for 30 + years and  it suddenly has value

It probably only feels like 30 years, but it's actually been over 50 years since you bought that 12-cent book off the rack.  Man, time sure does fly.  

[shadroch]

Suppose the original owner estimates the book is worth $250 and gifts it to his son, who sells it for $200.  

What tax is owed, and by who?

[Lightning55]

On 6/10/2024 at 2:52 AM, shadroch said:

Suppose the original owner estimates the book is worth $250 and gifts it to his son, who sells it for $200.  

What tax is owed, and by who?

I'm pretty sure you can gift funds to a family member up to X amount, tax free to both parties, but in that scenario, you have already paid the taxes on said funds when you obtained it. 

My guess, in the proposal above, is that the gain is still taxable to you at $250-12 cents.  The son can show a $50 loss when he sells it, to be used against other gains.

I'm not an accountant, but I did sleep at a Holiday Inn Express last night.

[shadroch]

On 6/10/2024 at 12:11 AM, Lightning55 said:

I'm pretty sure you can gift funds to a family member up to X amount, tax free to both parties, but in that scenario, you have already paid the taxes on said funds when you obtained it. 

My guess, in the proposal above, is that the gain is still taxable to you at $250-12 cents.  The son can show a $50 loss when he sells it, to be used against other gains.

I'm not an accountant, but I did sleep at a Holiday Inn Express last night.

What gain?  The OO gave the book to his son.  

[Lightning55]

On 6/10/2024 at 3:14 AM, shadroch said:

What gain?  The OO gave the book to his son.  

Yes, but it has a gain based on the value at the time of conveyance.

My theory is that somebody is making a gain, either the father from the appreciation, or the son from the zero cost basis and $200 sale.

Certainly we know that it appreciated, and tax is due when "disposed".  I doubt the IRS will interpret it as 2 tax free events, but someone with more specific knowledge will know how that is treated under the tax codes. 

[ThothAmon]

[jimbo_7071]

On 6/9/2024 at 10:14 PM, DougC said:

speaking from a purely hypothetical and very anti tax stance...

I don't self report anything that I have not been personally issued a correct 1099 for, by someone else.

 

Your moral position on what you owe the government and are willing to pay is between you and your accountant.

Did you just admit to tax evasion?

[The humble Watcher lurking]

On 6/9/2024 at 8:59 PM, WEBHEAD said:

It just seems that if you picked a book off the rack for 12 cents that you owned for 30 + years and  it suddenly has value.  how would the impact for  an investment of 12 cents over 30 years and now might be worth less say $200 what might the 1099?  Just asking a question I'm sure many of us have books like that 

Thanks in advance

 

Webhead * collecting since 1950's

Also be advised some of these qualified tax preparers charge more than $200 for their services. 

 

[rsouxlja7]

On 6/10/2024 at 1:52 AM, shadroch said:

Suppose the original owner estimates the book is worth $250 and gifts it to his son, who sells it for $200.  

What tax is owed, and by who?

The son's cost basis in the book is the same as the father's assuming the book was given while the father is alive. If the son inherited the book his cost basis is the FMV of the book on the day he died. Son owes tax when he sells it regardless of the situation.

 

On 6/10/2024 at 6:09 AM, jimbo_7071 said:

Did you just admit to tax evasion?

The best is when people do this in collecting groups on Facebook with their full legal names and locations available for anyone to see. 

Edited June 10 by rsouxlja7

[Qalyar]

On 6/10/2024 at 8:05 AM, rsouxlja7 said:

The son's cost basis in the book is the same as the father's assuming the book was given while the father is alive. If the son inherited the book his cost basis is the FMV of the book on the day he died. Son owes tax when he sells it regardless of the situation.

This is correct.

Also, for the purposes of the one-year short-term/long-term holding distinction, if the father gifted the book while alive, the clock does not reset when the book is gifted, so the sale will be subject to long-term capital gains tax if the entire father + son holding period is greater than one year. If the book was inherited, its sale is presumptively a long-term capital gain.

On 6/9/2024 at 9:54 PM, Lightning55 said:

The long answer:  While the above is true, it may be mitigated by offsets such as possible overhead expenses - storage, grading, restoration, shipping, etc. resulting in a lower tax exposure.

Sometimes. Restoration costs add to the basis, and my reading is that grading fees probably would as well. Whether or not the costs of storage add to the basis is... unclear, and may depend on how the IRS classifies you in regard to your ownership of the collectible. If you are deemed an investor, then storage costs generally add to the basis. If you are a collector, that is probably not the case. If you're a dealer, then an entirely different set of tax rules apply. 

In general, this is an especially ugly subset of tax law, and there have been several changes to the rules in relatively recent years (in particular, whether investors could deduct the holding expenses of their investment collectibles as a miscellaneous deduction; as of now, they cannot). IANAL or a CPA. Consult with an appropriate professional as needed, preferably before any substantial transaction. 

[DougC]

On 6/10/2024 at 6:09 AM, jimbo_7071 said:

Did you just admit to tax evasion?

of course, I always admit to federal crimes on internet forums.....

 

If someone is worried about giving the government money on a random $200 sale, I have some bad news for everyone that has ever given money to a friend without reporting it, or your untaxed yard sale purchases and sales, even contest winnings.... registry awards are right around the corner .

 

obviously don't listen to rando's on the internet for tax advice, but the IRS swat team isn't busting down your door because you sold a Darkhawk #1 at a convention and didn't report it. That drastically changes when you try and not report that highly publicized Action #1, though. Reporting this stuff if you are at the level that it needs reporting is very messy and should be handled by your accountant because they know what profit means, what can be deducted to limit exposure, and most importantly the exact form needed.

 

[shadroch]

It comes down to common sense. No one, not even the mean and evil IRS cares if your Dad gives you a $200 comic.  The son could keep it , sell it for a loss or even sell it for a profit.

If your Dad gives you 2000 $200 comics, everyone wants a piece.

[vheflin]

Gift it to your neighbor's dog.  The neighbor, acting as dog's legal guardian, sells it.

Important: all comms with the neighbor must be hush hush - no phones!  Meet in Walmart parking lots in camera blind spots.

Deposit sale proceeds in an offshore account.  Then get a goldfish and create a charitable fish food LLC.

There's a clerk at a 7-11 in Brazzaville, capital city of Congo.  He will buy 19 Brazzaville post office money orders with crypto from the offshore account.

Go to Africa on a safari tour and happen to visit the 7-11.  Smuggle the money orders back onshore, you know where you have to hide them.

Have co-workers slowly donate the money orders to the fish food LLC during yearly office secret santa.

Don't worry, I'm a CPA, this is my bread and butter, I do it all day long.

 

[Math Teacher]

On 6/9/2024 at 9:54 PM, Lightning55 said:

The short answer:  If you sell a book for $200 that you paid 12 cents for, you owe taxes on the $199.88 income.

The long answer:  While the above is true, it may be mitigated by offsets such as possible overhead expenses - storage, grading, restoration, shipping, etc. resulting in a lower tax exposure.

Super short answer: Consult a tax professional.

As I understand it, some of these expenses are not available to you unless you're a dealer. But then, I'm not a tax accountant.

[rsouxlja7]

On 6/10/2024 at 9:19 AM, Math Teacher said:

As I understand it, some of these expenses are not available to you unless you're a dealer. But then, I'm not a tax accountant.

That's not exactly true but the things you can deduct will depend on if you are recognizing the income as long term capital gains taxed as collectibles on Schedule D or as business income on a Schedule C. 

You would use Schedule C if you are a flipper/dealer/whatever (and you don't need an LLC or be set up as a business to do this). You'd use Schedule D if you've collected for years and now you're selling the collection, i.e. everything you have owned over 1 year. 

Grading and restoration should be deductible in either case because they add to the basis of the book in question.

Shipping is iffy on the Schedule D - I am not 100% sure on that one.

Storage you can deduct if you are using Schedule C - you'd deduct that year's storage cost but nothing from prior years. If you are using Schedule D that's gonna be a no. 

Edited June 10 by rsouxlja7

[MattTheDuck]

The seeming complexity of this one tiny area tells you all you need to know about what's wrong with the US tax code.

Edited June 10 by MattTheDuck