Not sure if this is the right section.
But I have a quick tax question for any accountants out there.

I collect a lot of things (mainly militaria type stuff)
For the most part, I collect and don't sell much. But thinking into the future if I want (or have) to sell some of my things, how do I get an appropriate "cost" for sold items?

The majority of my things were bought years ago and I have no records of purchase price.

But I also do not want to put "0" as my purchase price and have to claim whatever I sell an item for as 100% profit.

Just curious how to navigate this if I decide to sell in the future.

Thanks guys

The advice I give clients is to look hard through their records to see what they can find.  Failing that, "Put what you're comfortable trying to justify to an IRS agent."

PS - Collectibles are taxed at ordinary rates, capped at 28%, even if you've held them for more than a year.

That's what I assumed. Thank you.
A lot of things were bought on craigslist, at garage sales, etc. so there was never any "record".

Could you explain the "taxed at ordinary rates" a little bit more? Really want to try and understand. Thanks!

Ordinary tax rates are the rates for your wages, interest, pension, social security, etc.

There are also capital gain rates which are paid when you sell certain capital assets.  For the sake of brevity, a capital asset is something you hold for investment purposes.  This could be real estate, stock, or bonds.  If you own those items for more than a year and you sell them at a gain, you would pay taxes at long-term capital gain rates.  Those rates are much better than ordinary rates - 0% in some cases and about half in many others.

The sale of collectibles is reported on Schedule D and Form 8949.  Collectibles would be artwork, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, and certain other tangible personal property.  Other tangible personal property could be militaria, guns, Elvis plates, or action figures.  Unfortunately, gain on sale of collectibles is taxed at ordinary rates up to 28%, not the cushy capital gain rates.

You know the guy at the gun show that only deals in cash?  Guess what he's trying to avoid.  Cash that never hits the bank can be very hard to track.

Don't break the law.  Pay your taxes.  Seek advice from an enrolled agent, CPA, or tax attorney in your area.  

Sell for cash.  Don't involve the government in your hobby.

Most things are impossible to sell locally and ebay is the only way

Thanks for your help!
If collectibles are sold through ebay or as a schedule C business, are they reported differently? (not form 8949)

I've talked to a few people who do it as a business so just curious. Thinking along the lines if I ever started to buy sell to actually make money or as a retirement thing etc

You're welcome!

Schedule C is for businesses.  Are you in the business of buying and selling collectibles for profit?  This is like "how many guns do I need to sell before I need an FFL of my own so the ATF doesn't crawl up my butt for dealing without a license?"  There's no specific number.

You want to avoid Schedule C, if possible, because profits are subject to ordinary rates (with no 28% cap) AND they are also subject to self-employment tax.  Yuck!

BUT!  There are some advantages to running a legitimate business.  If you're paying for health insurance out of pocket, the premiums become deductible as a 1040 adjustment, not on Schedule A.  If you're still contributing to a traditional IRA, transitioning to a SIMPLE or SEP allows for larger contributions.  If you're using a dedicated portion of your home to run the business, you can get a deduction for that too.  None of that applies if you're just liquidating a collection.

Selling through Ebay doesn't automatically dictate the activity should go on Schedule C.

If the transactions belong on Schedule D/8949, you can still take a deduction for your shipping, packaging, fees, etc.  This is done by adding the selling costs to your basis.

Just a warning: selling through an entity that uses Paypal may trigger a 1099-K to be issued.  You will receive one if the gross amount of total reportable payment transactions exceeds $20,000, and the total number of such transactions exceeds 200.

Do NOT ignore a 1099-K.  I've gained a few clients who self-prepared and ignored the 1099-K and then came to me to fix the mess after IRS said "Where's the 1099-K money?"

@cowboy @tieronebeancounter @okc556cpa  Anything else I'm missing that avigo should be aware of?

Be glad you are showing a profit and pay the taxes.

It is better than the alternative, a loss.