Capital Gain Taxes

It is all a matter of it being reported. If you take a AGE in sell it, then even if you bought at $350 and sold it today for $700, technically you have a cap gain, but these purchases under a threshold I think is $1000 are not reported. However if you took a whole roll of 20 of them in and sold them, you have a cap gains of $7000 and it will likely get reported by the purchasing dealer. That is when you have to pull the driver's license etc. out so they can verify your legally selling them, and so that it can be reported.

However, if you conduct a private sale, betwixt yourself and another collector, who knows? Are you going to contact the Feds so they can tax you?

There's no such thing as "technically" a capital gain. Either it is or it isn't. You should read this again: Example: You sold a painting on an online auction Web site for $100. You bought the painting for $20 at a garage sale years ago. Report your gain as a capital gain on Schedule D (Form 1040),

I think Scottishmoney is saying that you're unlikely to get caught if you have a profit of only $350 on the sale of a coin and no one else reports it. That's probably true. But the fact that someone doesn't report the sale doesn't mean you don't owe taxes on it.

But that IRS tax-tip provided by Inacoffeebuzz adds an angle I hadn't thought about. It looks like there are no tax implications if you sell a coin ocassionally in the course of pursuing your hobby which doesn't make a profit overall.

Sorry Scottishmoney. I edited my post while you were responding to it. Would I report a 50 cent profit on a coin sale? No, I probably wouldn't. $350? yeah, I probably would. I was audited by the IRS once and they can be pretty thorough. . If you are buying coins to resell, I'd keep good records. .

I've never sold a coin either.

chas made a good point, one's perspecitve on the right thing to do will likely changes after an IRS audit.

Scottish, who's the pic of in your avatar?

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Scottish, who's the pic of in your avatar?

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It is Jaroslava Mucha, the artist/designer of this note's daughter.

On a similar note; I was reading in Coin World about the new requirement for Green Bay, WI second-hand dealers and other resellers to report all of their coin/gold/jewelery sales to the police. It turns out that they were already required to report them on paper and this change is to have them submit the reports electronically.

I don't think I ever really have any money. My income is taxed, I pay sales tax on everything I buy, I then pay personal property tax on the things I own, and if I decide to sell something... please take the rest of what I have left.

Thanks,

Jim

If you invest serious money in coins, it's important to keep records, particularly receipts showing purchase prices. The receipts establish your "basis" for tax purposes in case there is a question as to what the profit is when a coin is sold. Your heirs/beneficiaries should know where the records are in case the worst happens.

In general ALL income is reportable. The question is how it is reported (Capital Gains is for items held OVER a year. Items held less than a year are not subject to capital gains. At least that is my understanding.)

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Here's the key part: Sale of personal items. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry or silverware, your gain is taxable as a capital gain. Report it on Schedule D (Form 1040). You cannot deduct a loss.

However, if you sold an item you held for investment, such as gold or silver bullion, coins or gems, any gain is taxable as a capital gain, and any loss is deductible as a capital loss.

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The key here is that in order for the IRS to accept the income or loss as being from an investment you MUST have detailed records that clearly illustrate that you are actively pursuing it as an investment. Keep detailed records of purchases (who from)and sales (who to) and profit/loss on each item, charts tracking values between times, subscribe to investment newsletters dealing the type of items you are investing in. Keep them stored separately from any non-investment material. (Suggestion get a local tax resale license it can be used as an argument that it isn't just a hobby, but if you do you should probably also file a schedule C and treat the coin buying and selling as a business. Make sure you show a profit at least three years out of five. Added benefit is that as a business you can write off some expenses that you can't as a hobbyist.) If you can't clearly demonstrate to the IRS that they are strictly an investment they will be ruled to be a hobby and all of the profits will be subject to Capital Gain treatment. And here is another insult. While many other things are taxes at a lower rate under capital gains (maximum rate is 28%), coins and collectibles are taxed at a FIXED rate of 28%. (My income is taxed at a lower than 28% rate, but if I sell my coins THEY will be taxed at 28%, not my normal 15% rate.)

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An interesting item of note is that in many states buying bullion (e.g. American Silver Eagles) is a tax free sale, since it is an investment,

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For purposes of state sales tax, not IRS income taxes.

While capital losses are not allowed on non-investment, they CAN be used to offset capital gains. You just can't claim a net loss if it isn't an investment. If you can prove that you are actively pursuing it as an investment then you can carry over losses to subsequent years.