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Capital Gains Question

8 posts in this topic

Do Auction houses report the sales to IRS?

 

What if you hvae a net loss on a coin?

I have sold coins on Ebay for a small profit 20.00-50.00, but I have also sold my losers at a loss.

I wonder to what extent small time coin traders report to IRS.

 

What about Ebay? Do they report business transactions to IRS? How does IRS track this online transactions?

 

 

Thanks for your help.

 

OP

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Very difficult to answer.

 

Capital gains apply to "investments"

Regular ol' taxes (like the ones you apply to your job) apply to a business.

 

Now you have to determine whether your coin trading is an investment or a business and that is very hard to answer as only you know what is going on. See an accountant if it's a big chunk.

 

My own experience: I sold my set of $10 Indians a few years ago. I had nothing to do with any kind of coin business so I deemed them an "investment" since I collected the series about 15 years. I had a gain and reported it as such. Also, the gain for that type of investment is NOT what you normally see such as when you sell a stock or real estate. Those are taxed at 15% flat if held for more than a year. Collectibles are taxed at 28%. Ouch.

 

jom

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It is not complicated at all actually. Rare coins and bullion are considered capital assets. You either have a buisness and report your earnings/losses as a buisness with all the deductions thereof, or you report your earnings/losses as collectables on Schedule D and D1 (short and long term capital gains and losses). Irrespective of whether ebay or any other buisness/person you sell to reports something to IRS, you, by law, if you make any profit on any collectible (net capital gain, are required to report that earning on your tax return. In many/some cases, there may be no way for the IRS to prove your earned income, but do you really want to take a chance on that? If you are ever caught, the costs incurred will likely be more than the original tax you needed to pay, let alone if it looks real bad, you could be prosecuted for breaking the law.......

 

IRS link to Capital Gains

 

 

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It is not complicated at all actually. Rare coins and bullion are considered capital assets. You either have a buisness and report your earnings/losses as a buisness with all the deductions thereof, or you report your earnings/losses as collectables on Schedule D and D1 (short and long term capital gains and losses). Irrespective of whether ebay or any other buisness/person you sell to reports something to IRS, you, by law, if you make any profit on any collectible (net capital gain, are required to report that earning on your tax return. In many/some cases, there may be no way for the IRS to prove your earned income, but do you really want to take a chance on that? If you are ever caught, the costs incurred will likely be more than the original tax you needed to pay, let alone if it looks real bad, you could be prosecuted for breaking the law.......

 

IRS link to Capital Gains

 

Correct. Report the earnings. It's not worth testing if the IRS will catch you playing games. I don't feel it's actually possible to really win an audit.

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Allow me to crystallize this for you. If you have crossed over the line from investor to dealer, your tax reporting and tax consequences change dramatically (see below). and a layman's definition of dealer (the guy who runs the local coin shop) is NOT the tax law definition. If you are actively buying and selling an item (any item), you're a dealer.

 

Generally speaking, there is no bright line test which tells you when you have crossed over to the dark side. It's a question of fact. How many buys and sells over what period of time?

 

Here are a few things that will almost guarantee you have crossed over: (a) you have a sales tax license and collect sales taxes on coin sales, and avoid sales taxes on coin purchases. (b) you have an Ebay store or a website, where you list an inventory of coins, etc. for sale, and you are actively acquiring inventory to run through your store/site. © you have several buy and sell transactions every week.

 

But check this: Let's say you acquired, over decades, 10,000 coins. and over a 2-3 year span, you sell them all on Ebay/website/etc. You are not a dealer. You are simply liquidating a position you built up over a long period of time. Dealing means actively buying AND selling.

 

So long as you are an investor, the coins are capital assets in your hands. and your gains and losses are capital in nature. you will have long term and short term gains and losses, depending on how long you held each item. if you end up with a net short term capital gain, it is taxable at your marginal rate. if you net out a long term cap gain, the tax rate is lower. net capital loss deductions are limited by statute.

 

BUT, if you are a dealer, the coins are not capital assets, they are inventory. and you have an active trade or business. Individuals report this activity on Sch C. A net profit will get taxed at your marginal rate, PLUS is subject to the full plate of employment taxes. The good news is this: You can take business deductions for many, many things that an employee cannot. So keep receipts, and learn to capture every penny you spend. The better you know how to use Quicken or Quickbooks for capturing EVERY PENNY YOU SPEND, the lower will be your net tax liability.

 

 

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I know that at certain sales levels, consignment sellers like eBay and conventional auction houses are supposed to report the gross sales payments to you (gross sales less commissions) to the IRS. You are responsible for calculating the gain or loss.

 

Unless the law has changed from some years ago, I'm not sure that coins can get capital gians treatment any more. You will have to see your accountant about that.

 

Also to claim a loss on coins, you have show in some way that you are an "invester" not a collector. In other words you have to show that you were buying the coins with the idea of making a profit.

 

If you have not reported income from the sale of coins in prior years, you might have trouble claiming a loss against you taxable income.

 

I've been out of accounting school for a long time so all I can give you is questions you can ask your accountant. I hope this helps.

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I'm not sure that coins can get capital gians treatment any more.

If held for over a year they are treated as long term capital gains, but they aren't taxed at the 15% Capital Gains rate, they are taxed at 28%.

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