Legalities Of A Business Buying Coins For Resale & Investing

There are no rules that I know of when it comes to coins but I know there are rules when it comes to certain size bullion transactions.

Thanks everyone for all the knowledgeable responses.

BH1964, in regards to the following...

"Again nothing would be expensed....anything that is bought is bought out of profits that is taxable, so this isn't a way of buying coins while using it as a business expense.

Not sure I follow you here unless you're buying with start up profits from other ventures. Regardless of how you proceed, it sounds like you have the business acumen to proceed without undue concerns. "

If I buy 1000 widgets in January for 5.00 a piece, I don't show an expense against the business in the amount of $5000.00.

Lets say in March someone buys 100 widgets for 20.00 a piece. I would have income/sales of 2000.00, and expenses (cost of goods sold) of 500.00. Therefore I'd have 1500.00 profit.

I now have 2000.00 in cash (1500.00 of it being profit) that I can buy more merchandise with. So if I buy 2000.00 worth of coins I've spent 1500.00 worth of profit on coins.

At the end of the year I pay taxes, SS, etc on that 1500.00 in profit.

When I said (in the above quote) that nothing would be expensed, I meant that I wouldn't show a $2000.00 expense when I bought the coins (in the example). I would simply buy them from profits and then if and when they were sold I would then show the income from the sale and offset it with the expense of the cost of the coin.

There might be instances where I buy a coin or coins and simply keep it in my inventory without selling it for a number of years (10 to 15 years).

Any known issues with doing that?

TPG, carrying something in inventory for such a long time is the question. But the way of figuring the expenses (The COGS - Cost of goods sold) Method is very common and accepted.

In fact, if you're not tracking inventory (COGS method) and just expensing your purchases, then you need to do a year-end inventory to "pass through" the value (what you purchased them for) of your unsold items from one tax year to the next.

Making money selling coins is very difficult. It requires a lot of expertise and experience which is why not everyone is a coin dealer. I've sold a lot of coins over the years mostly for a loss, I'm for sure in the red if you added it all up. Personally, I wouldn't try to do this unless you like losing money.

In the UK (this is mostly aimed at Ben) there's a difference in business income and capital gains. If you're only occasionally buying and selling, particularly if a long time elapses between the purchase of a coin and its sale, it may be considered to be a capital gain. The gain (difference between purchase and sale price) is potentially taxable.

I'm not sure where 'hobby' selling becomes a business and your profit becomes income (and taxable differently). But unless you're selling a lot, things like that (and VAT) may not apply.

In the UK you can check such things with your local tax office. Not sure how things work in the US, whether they are state or governmentally regulated?

I appreciate all of the replies so far.

The question wasn't about how easy it is to make money selling coins.

I certainly have no grand illusions of making tons of money selling coins. With that being said I do have a pretty good grip on making money selling items online. Quite often there are deals to be had...sets or lots of multiple coins, and if someone is willing to break them up and sell them separately you can make a few dollars on them.

You can't make a great deal on most items online, but if you don't overprice stuff you can sell a large volume of items and at the end of the month you've made a pretty good amount of money. Kind of the same business plan as a big box store that most of us have heard of.

Also, as the original post indicated I don't have a problem sitting on something for a while if I need too....even if it turns into several years. That was part of the question also....if I bought something now and ended up keeping it and waiting on it to appreciate in value for a number of years.