Rutledge
Master Sergeant
- Joined
- Mar 17, 2006
- Messages
- 1,219
Scccarrrryy article in Thursday's (V-Day) Wall Street Journal regarding "Collectibles". While Toy Soldiers werent mentioned explicitly, it seems the tax man (may!) awaitith......
"If You Collect, the IRS May Collect From You" (from page D5)
To summarize:
Uncle Sammy may impose capital gains taxes, estate taxes and gift taxes on whatever you collect. It depends on what you ultimately do with your prized possessions-- sell ‘em, or pass down to the next gen.
One key is to determine your status: Collector, Investor or Dealer. Of course, most of us here will be one of the first two.
Investors can deduct expenses incurred in production of income. Collectors cant. But you have to keep very good records to claim Investor.
If you sell them, you pay a "special" (Isnt that nice??) 28%!! capital gains tax (nearly double the 15% current for LTCG on stocks). Capital gains rates on collectibles are expected to remain higher, despite intensive efforts from the "Art World".
If you dont sell, the collection will be included in your estate at fair market value (requiring appraisal). Above specific "thresholds", which change each year, heirs must pay the USG 45% of value (within 9 months). In 2009 the threshold will be quite high at $3.5 million; after going away completely (good year to die, hahaha) in 2010, its expected to be lower in 2011.
The concern with any non-liquid estate is that heirs must conduct "fire sales" in order to pay the taxman.
One way out is to gift the collectibles to a charity. Another possible escape is an "in-kind" exchange, but its pretty complex and doesnt seem very well suited to this hobby.
Anyway, I expect most people here will not be too concerned as regards their modest collection and relative to their overall estate. But a few might like to be aware, if they arent already.
Perhaps especially in the current political environment, depending on who gets elected.
"If You Collect, the IRS May Collect From You" (from page D5)
To summarize:
Uncle Sammy may impose capital gains taxes, estate taxes and gift taxes on whatever you collect. It depends on what you ultimately do with your prized possessions-- sell ‘em, or pass down to the next gen.
One key is to determine your status: Collector, Investor or Dealer. Of course, most of us here will be one of the first two.
Investors can deduct expenses incurred in production of income. Collectors cant. But you have to keep very good records to claim Investor.
If you sell them, you pay a "special" (Isnt that nice??) 28%!! capital gains tax (nearly double the 15% current for LTCG on stocks). Capital gains rates on collectibles are expected to remain higher, despite intensive efforts from the "Art World".
If you dont sell, the collection will be included in your estate at fair market value (requiring appraisal). Above specific "thresholds", which change each year, heirs must pay the USG 45% of value (within 9 months). In 2009 the threshold will be quite high at $3.5 million; after going away completely (good year to die, hahaha) in 2010, its expected to be lower in 2011.
The concern with any non-liquid estate is that heirs must conduct "fire sales" in order to pay the taxman.
One way out is to gift the collectibles to a charity. Another possible escape is an "in-kind" exchange, but its pretty complex and doesnt seem very well suited to this hobby.
Anyway, I expect most people here will not be too concerned as regards their modest collection and relative to their overall estate. But a few might like to be aware, if they arent already.
Perhaps especially in the current political environment, depending on who gets elected.
