Question posed to Esquire regarding taxes on comics.

[ronm3-migration]

Take the X-Men number 1 for example. If Doug is a dealer and he paid 100k for the X-Men then sold it for 300k are there any tax consequences?

Or does it fall under the collector sold to collector deal?

[Norrin_Radd]

Tax Thread

[esquirecomics]

Take the X-Men number 1 for example. If Doug is a dealer and he paid 100k for the X-Men then sold it for 300k are there any tax consequences?

Or does it fall under the collector sold to collector deal?

 

Ooooo, for this you are asking the WRONG person. I am soooooo not a tax attorney. I hate tax law. Purposefully avoided taking it in law school.

 

But, in any event, sure there are tax consequences. I would imagine it is just like any other transaction. In your scenario Doug would have to declare $200k in income and that would be taxable as such. Doesn't matter to whom it sold it or bought it from, at least to my knowledge.

 

Any tax attorneys or CPAs on the boards?

[action1kid]

I would think the buyer has to pay sales taxes on the price sold 300k and then the seller has to pay taxes as ordinary income or capitol gains on the 200k profit margin. In the stock market a stock held under a year is taxed as ordinary income[at your current tax bracket which varies from individual to individual but could be around 28 to 36 percent generally speaking] If a stock is held over a year it is taxed as a capitol gain and is taxed at a much much lower tax rate.

I dont know if this is a person to person or dealer to dealer sale as that would make a different tax issue.

A business has to deal with sales taxes collected and corporate taxes[on profits]

they are all collected by the federal, state and city goverments in new york.Some states dont collect city taxes ,each state is very different.This is a cash deal i assume?

[action1kid]

Im not sure wheather you would be taxed as ordinary income or a capitol gain[i dont have enough info from you] but that is why I brought up the comparison of how the stock market handles it in comparitive terms.Generally capitol gains taxes are used on items held a long period of time[stocks,homes]Ordinary income taxes are collected for items held a short time[like stocks under a year or your weekly salary.

[Forbush-Man]

There would be Capital Gains tax to be paid on the $200,000.00 profit, just like with profit from stocks.

[action1kid]

Yes on the profit,not on the sales price,you are correct

[Bronty]

At least in canada, that's the correct treatment (tax on the gains). Gains here are taxed at half the rate of ordinary income, not sure if that's the case in the US as well.

[action1kid]

Over a year capital gains in the u.s are 15 percent and even lower for a 5 year hold

[FlyingDonut]

Why don't you call Doug up and ask him?

[ronm3-migration]

Why don't you call Doug up and ask him?

[action1kid]

Yes, verify it with a certified accountant

[action1kid]

A business accountant! Not a mom and pop accountant.Believe me that is good advice.

[delekkerste]

The U.S. capital gains tax rate on collectibles such as art, comic books, etc. is WORSE than that for stocks. There was a bit of controversy last year regarding tax treatment for the streetTracks Gold Shares exchange-traded fund (GLD), since it is a stock that trades on the New York Stock Exchange but investors are subject to the capital gains treatment for gold (considered a collectible by the IRS) instead of the lower cap. gains treatment for stocks.

 

Collectibles held under 1 year are subject to short-term capital gains rates of ordinary income tax rates up to 35%. Collectibles held more than 1 year are subject to a long-term capital gains tax rate of 28% (versus only 15% for most stock investors and 5% for those in the lowest tax brackets).

[Jeffreykli]

Take the X-Men number 1 for example. If Doug is a dealer and he paid 100k for the X-Men then sold it for 300k are there any tax consequences?

Or does it fall under the collector sold to collector deal?

 

The tax consequences will depend on whether the seller is a dealer or not. Since in your question, it's Doug, and Doug likely treats it like a business, he should report $300k in sales, which is reduced by his $100k cost of goods sold. So, his net revenue is $200k on that one sale. But, since it's his business, he also gets to deduct his ordinary and necessary business expenses, like website maintenance, postage, utilities, transportation, insurance, etc. At the end of the year, if he made a net profit, and depending on how his business is organized (as a corporation or not), there will be income tax due.

 

For sales tax purposes, the consequences will depend on Doug's state's sales tax laws (Florida), and whether the sale was made entirely within Florida or not. I have no idea about Florida sales tax.

[esquirecomics]

Why don't you call Doug up and ask him?

 

I presumed the question was a generic one just using Doug as the example in light of the other discussion.

[FlyingDonut]

Why don't you call Doug up and ask him?

 

I presumed the question was a generic one just using Doug as the example in light of the other discussion.

 

Right, but Doug would be able to answer it, even the generic question, as he's done this sort of thing before. The answer, btw, is that you pay capital gains on the profit on the book, with your capital gains tax depending on how long you're held the item. Flipping, in this case, is better.