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Posted: 4/18/2011 3:07:53 PM EDT
Lets suppose that someone has some coins....silver U.S. common date stuff.
With the going rate being what it is, lets say they want to sell some stuff.
Lets further assume that most of it was accumulated over time at flea markets, coin shows, various coin shops....small purchases here and there....and no receipts were ever kept.

Pretty much everything was a cash transaction...there are no records whatsoever.

When you go to sell your coins...say a few thousand dollars worth...how do you estimate the taxes you need to pay?

Does the IRS accept personal records (like a personally maintained spreadsheet) or do they insist on formal receipts?

When you sell to coin dealer / pawn shop / etc, do they file any specific tax information that would result in a 1099 or similar form?

How does a person stay legal and remain honest if they dont know what they invested?
If the only way to determine the profit is a best guestimate.....what does a person do?
Link Posted: 4/18/2011 3:12:20 PM EDT
Unless you sold them out of state via the internet, I do not believe you would be under any obligation to pay tax.
Link Posted: 4/18/2011 3:22:51 PM EDT
Originally Posted By IceDiver:
Unless you sold them out of state via the internet, I do not believe you would be under any obligation to pay tax.


If you are making a profit wouldnt that be subject to capital gains taxes?

If you bought a roll of Morgan dollars ten years ago and sell them today you are making around $400 dollars profit....technically you would have to pay tax on that.....no?

Thing is....what if you dont have any reciepts?

For the record, I'm looking for the actual legal answer.....I know a person could take the coins to a flea market, sell them for cash and walk away....but what is the requirement if someone wants to remain 100% legal?

Link Posted: 4/18/2011 3:58:44 PM EDT



Originally Posted By macro:





....but what is the requirement if someone wants to remain 100% legal?







No one can remain 100% legal.  It truly depends who is enforcing which rules at whatever time you happen to be in the spotlight.



 
Link Posted: 4/18/2011 4:05:48 PM EDT
Pretty much everything was a cash transaction...there are no records whatsoever.
 


I stopped reading there.
Link Posted: 4/18/2011 4:19:23 PM EDT
Assuming a coin dealer cuts you a check for the total sale (and for arguments sake, lets say that is the only option) there is a record of the transaction - lets even assume that its a big check....in excess of $10k.....clearly the bank will be recording the transaction....I'm just curious what gets recorded on all sides...by the seller....by the bank...and what I would have to do if i were a seller.

Something tells me this is a grey area.
Link Posted: 4/18/2011 4:25:26 PM EDT
Originally Posted By macro:
Assuming a coin dealer cuts you a check for the total sale (and for arguments sake, lets say that is the only option) there is a record of the transaction - lets even assume that its a big check....in excess of $10k.....clearly the bank will be recording the transaction....I'm just curious what gets recorded on all sides...by the seller....by the bank...and what I would have to do if i were a seller.

Something tells me this is a grey area.


I would say... theoretically... that it is very gray.

If you bought everything cash, you could have bought them 20 years ago and made a killing... or you could have bought them all last week at the coin show with cash on a whim and found that you need the money quickly and maybe even sold at a loss... so it's the seller's call as to what the best guess is.
Link Posted: 4/18/2011 4:27:17 PM EDT



Originally Posted By macro:


Assuming a coin dealer cuts you a check for the total sale (and for arguments sake, lets say that is the only option) there is a record of the transaction - lets even assume that its a big check....in excess of $10k.....clearly the bank will be recording the transaction....I'm just curious what gets recorded on all sides...by the seller....by the bank...and what I would have to do if i were a seller.



Something tells me this is a grey area.


As I understand the current laws, the coin dealer would be obligated to issue a 1099 to you for compensation to a non-employee.



Unfortunately the 1099 would be in the FULL amount of the transaction and you would then have to provide verification of your actual profit.



How you can legally provide that verification is still a mystery to me as every answer I've ever seen required written records or receipts.



 
Link Posted: 4/18/2011 7:08:24 PM EDT
Originally Posted By blwngazkit:
As I understand the current laws, the coin dealer would be obligated to issue a 1099 to you for compensation to a non-employee.

Unfortunately the 1099 would be in the FULL amount of the transaction and you would then have to provide verification of your actual profit.

How you can legally provide that verification is still a mystery to me as every answer I've ever seen required written records or receipts.

As part of HCR starting in 2012 payments from businesses to other businesses or individuals for the purchase of products and/or services totaling more than $600 over the year must be reported on a 1099.  Congress has said it will be repealed later this year.

So, if the OP sold the coins this year there wouldn't be a 1099 issued.

I don't know if profits on coins are taxed at the capital gains rate for investments (15%), or the rate for collectibles (28%).
Link Posted: 4/19/2011 6:50:46 AM EDT
The IRS rules on what makes complete documentation for the purchase of an asset are vague.  In your case, a receipt would be acceptable.  Since your purchase was from an individual, and no receipt was given, you should make a note or record for the amount.

If you report that you paid a large ($10,000+) amount for the item, the IRS will likely ask for the name and address of the seller or disallow your deduction.

If you have a trade journal or classified ads that show your coin on a particular date with a price, that will help greatly.  If you have a published market price list of precious metals, that will do.  The IRS does not know when you bought the item, so you can chose the date for the price.

There is no requirement to provide the documentation at the time you file the return.  So, your only risk is in the event you are audited.  At that time, an auditor will request the paperwork.  The auditor may or may not accept your documentation.  If your documentation is rejected, expect them to use -0- as your basis and make the entire sale amount to be capital gain.

BTW: Coins in particular have special taxation rules for Capital Gains and might be taxed above your regular income rate.

Cheap Advice:

It will not likely show up on the IRS radar if:

If this is a $100-200 sale.
If it was entirely a cash transaction.
If the payer did not take your SSN and address.
Link Posted: 4/23/2011 7:26:54 PM EDT
I believe, that you are given a 1099 by the buyer, and then I believe you are supposed to use that as a basis for a capital gains tax.
Link Posted: 4/24/2011 12:29:35 PM EDT
Originally Posted By Uberjager:
I believe, that you are given a 1099 by the buyer, and then I believe you are supposed to use that as a basis for a capital gains tax.


I have been trying to determine if U.S. coins are taxes as collectibles, or if the sale would be taxed as a capital gain. (CGT would be about half the amount)
Link Posted: 4/26/2011 9:34:16 PM EDT
The example earlier assumes $400 profit, but takes nothing into account of the theft by the Federal Reserve.
Link Posted: 4/29/2011 7:22:39 AM EDT
[Last Edit: 4/29/2011 8:00:04 AM EDT by tax_monster]
Originally Posted By macro:
Originally Posted By Uberjager:
I believe, that you are given a 1099 by the buyer, and then I believe you are supposed to use that as a basis for a capital gains tax.


I have been trying to determine if U.S. coins are taxes as collectibles, or if the sale would be taxed as a capital gain. (CGT would be about half the amount)



Uberjager is quite wrong in his statement.  If the buyer (must be a dealer, no individual will give you a 1099) gives you a form 1099-B, that is reported to the IRS as the sales price.  It it up to you to show basis (cost).

A spreadsheet probably won't cut it, as the IRS requires contemporaneous records (records made at the time of purchase).  The IRS has denied spreadsheet records as proof of car mileage records, so I think it would also apply here.

If you bought the coins, your basis is your purchase price.
If you got them as a gift, your basis is whatever the person who gave them to you, paid.
If you traded for them, your basis is the basis of the stuff you traded away.
If you inherited them, your basis was the value as of the date of death of the person you got them from.
If you cannot prove basis, your basis is ZERO.

Coins and gold/silver bullion get screwed in the tax code and are classified as collectibles, with a maximum capital gains rate of 28%.


ETA:  The dealer reporting requirements are not always well understood even by the dealers themselves.  Some may report everything above a certain amount, some may report nothing.  The last I heard, if you sold more than $1000 face value in 90% silver, or more than 1000 oz of silver (but not US Silver Eagles), or more than 25 ounces of certain gold coins, the dealer must issue you a 1099-B.

ETA #2:  Found this: http://www.golddealer.com/questions_and_answers.html#List%20of%20Reportable%20Bullion%20Trans­actions
The following is what The Industry Council For Tangible Assets has to offer about what the I.R.S. wants in the way of paper work. They are describing the paper work provided by bullion dealers which relate to what you purchase or sell. These rules are taken from the ICTA newsletter Washington Wire dated December, 2004.

   *

     First: You can place any size order and pay with a check. No one cares, not even the government. The only time they want to hear from us is if you invest more than $10,000 in cash. Then you must fill out I.R.S. Form 8300. There is nothing wrong with large cash transactions, but the government wants to know about them. And, by the way, you can't spend $5000 today and $6000 tomorrow, for Uncle Sam does not like to be fooled.
   *

     Second: There are rules which apply only to bullion and only when you sell. They have nothing to do with your purchases, and do not apply to rare coins. Kilo bars are 32.15 troy ounces of gold and are subject to reporting. We are also required to report any gold bar sale totalling 32.15 ounces are more. Concerning 1 troy oz. gold coin transactions: If you sell 25 coins or more of the Krugerrand, Maple Leaf or Mexican Gold Onza we are required to report them on I.R.S. Form 1099B. Such reporting is not required on transactions involving the U.S. Gold Eagle the Australian Kangaroo or the Austrian Philharmonic. There is also no reporting on any small gold bullion coins.
   *

     Third: We are required to report $1000 face 90% silver bags and 1000 ounce silver bar transactions only when you sell to us. We are not asked to report the sale of 40% bags or less than $1000 face in 90% silver coin. The 10 and 1 ounce silver bar is exempt as long as the sale does not exceed 1000 ounces.
   *

     Fourth: Platinum or palladium bars in quantities of 25 ounces or more are reportable. Platinum bullion coins like the Canadian Maple Leaf, the U.S. platinum Eagle, or the Australian Koala are exempt. Palladium bullion coins like the Russian Ballerina are exempt. If these rules seem arbitrary we don't blame you. We believe our government based their decisions on what was traded on the nation's commodity exchanges and had little to do with what was happening in coin stores across America.



ETA #3:  Had to fix something above.  Had a brain freeze and got gift basis / inherit basis mixed up. Need more caffeine.  
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