A question that should be answered.

[Tay1038]

Hey Guys.
I have a quick question. I'm not very educated about this kind of stuff. Say someone who just collects sports memorabilia and does not own a business, bought an item at a low price and sold it for a substantial profit - should you claim this under federal tax?

Or how about you receive a bat at a baseball game and later on sell it. Should you claim that too?

Lets here your thoughts! or even some stories (good/bad).

[cohibasmoker]

Re: A question that should be answered.

[QUOTE=Tay1038;160763]Hey Guys.
I have a quick question. I'm not very educated about this kind of stuff. Say someone who just collects sports memorabilia and does not own a business, bought an item at a low price and sold it for a substantial profit - should you claim this under federal tax?

Or how about you receive a bat at a baseball game and later on sell it. Should you claim that too?

Lets here your thoughts! or even some stories (good/bad).[/QUOTE

Isn't it Patriotic to pay your taxes?

[eGameUsed]

Re: A question that should be answered.

Hey Guys.
I have a quick question. I'm not very educated about this kind of stuff. Say someone who just collects sports memorabilia and does not own a business, bought an item at a low price and sold it for a substantial profit - should you claim this under federal tax?

Or how about you receive a bat at a baseball game and later on sell it. Should you claim that too?

Lets here your thoughts! or even some stories (good/bad).

The answer to your question is Yes. Even if you consider what you do as a hobby, and even if you put the money back into your collection, the IRS considers it profit, which is taxable. You will be considered a sole proprieter, meaning you do not have to carry an official business name and in many cases not even be a registered business.

If you ever get audited, be prepared to explain each and every deposit into your bank account.

There are advantages to forming a small business, or DBA (Doing Business As). Sure, you have to pay taxes, but you can also write-off milege to purchase items, set up a SEP (Self Employment Pension, like a 401K for yourself), and even write-off sports show entrance fees, etc.

Hope this helps!

[David]

Re: A question that should be answered.

You are required to report the profit as taxable income.

Duly note that if you are an avid reseller-- say sell part time on eBay or locally-- you can obtain a state resale license, which allows you to buy things for resale and not have to pay sales tax on the purchases.

[both-teams-played-hard]

Re: A question that should be answered.

Isn't it Patriotic to pay your taxes?

Actually Cohibasmoker, it's patriotic to pay more taxes if you are a billionaire, as opposed to making the salary of a school teacher.

[whatupyos]

Re: A question that should be answered.

Actually Cohibasmoker, it's patriotic to pay more taxes if you are a billionaire, as opposed to making the salary of a school teacher.

LOL Please!!

[cohibasmoker]

Re: A question that should be answered.

Actually Cohibasmoker, it's patriotic to pay more taxes if you are a billionaire, as opposed to making the salary of a school teacher.

Warren - sure, the Billionaires are going to pay for everything. I am sure there is enough money from the Billionaires to cover the trillion dollar deficits.

[spartakid]

Re: A question that should be answered.

[MSpecht]

Re: A question that should be answered.

Thanks Ricards---let's keep this one on track---
Mike

[jppopma]

Re: A question that should be answered.

Some states like Michigan even have a spot on the tax forms for you to list anything that you purchased online or out of state. They expect to list everything and then pay the 6% sales tax on these items as well.

In the big picture, I'm sure that not listing a few jerseys you sold on Ebay is pretty minor compared to all of the other tax fraud that goes on. Of course, I can't support any of it though.

[GoTigers]

Re: A question that should be answered.

Great thread.. You definitely "should", but I'm guessing that most of us don't keep spreadsheets of what we've bought and sold over the past year on ebay.

This happened to me in the past. It's something you really have to look at before putting an item up at auction. After authentication fees, consignment fees, capital gains taxes, and the original price paid of the item. A $5000 hammer price can quickly turn into less than $2000 net. Then you have to ask yourself is it worth selling, would you rather have a 5g bat or 2g's cash?

[PwKw13]

Re: A question that should be answered.

Is my understanding correct that, if you don't have a resale license, you have to pay sales tax when you make a purchase plus you have to pay tax on the gain if you sell at a profit? It would seem that if a collectible is purchased as an investment and gains are reported, sales tax shouldn't apply -- similar to buying and selling a share of stock.

[Tay1038]

Re: A question that should be answered.

I'm happy to see numerous people responding to this thread. As a young collector as myself - this is not something that really crossed my mind until now.

What do you consider a frequent buyer? Some who maybe buys a couple bats here and there every month or two either off the forum, eBay, collector shows, or pro shops? Please go more in depth.

Is their any kind of benefit for someone who is collector first and a dealer second? With the circumstances in the above paragraph - is it worth getting a resale license?

----------------------------------------------------

GoTigers - You make a real good point on the investment and sale of a collectible.

eGameUsed - Thank you for posting the helpful information. I hope this answers a few question for some people.