Violin sold for $ 15,000

[John of PA]

Taxpayer sold her Violin that her aunt gifted her for $ 15,000. Is gain taxed at 15% max or ordinary rates. She is not a professional musician, for that matter she's not much of a musician at all. An imput is appreciated. Thanks

[veritas]

Capital gain. Holding period includes Aunt's holding period. Do you know what Aunt's basis is?

[Gary]

Collectible

If the violin can be considered a collectible, it is taxed at her tax rate up to 28%.

[John of PA]

Aunt's basis

Capital gain. Holding period includes Aunt's holding period. Do you know what Aunt's basis is?

Aunt's basis is not know, but believed to be very little, so we are using zero.

[John of PA]

Collectible??

If the violin can be considered a collectible, it is taxed at her tax rate up to 28%.

The violin is without a doubt an antique with above average value, so yes it can be cosidered a collectible like a coin collection. However, the owner is not a collector of violin's or any other collectibles.

[Matt Sova]

Does not matter

The violin is without a doubt an antique with above average value, so yes it can be cosidered a collectible like a coin collection. However, the owner is not a collector of violin's or any other collectibles.

It does not matter if this person is a collector or not. The tax rate is the personal rate up to 28%.

[Ken]

violin

wouldn't your clients basis be what the violin was worth at the time it was given to her?

[Dennis V]

Basis & Collectible

The basis of any gift is the basis of the giver. It doesn't get a stepped-up basis unless the owner dies.

If the violin is being played, I don't think it right to classify it as a collectible. Besides, $15,000 for a violin is not all that much. Sure, the cheap student models are only a few hundred to a few thousand dollars. But anyone who is serious about music would spend several thousand dollars for an instrument at the very least. If you are playing professionally, the normal cost of a violin is probably between $10,000 and $50,000.

This brings up another question. What determines if something is collectible? Does it depend on what the seller used it for or the intent of the buyer? If the buyer bought it to display in his home, does that make it a collectible, even if the seller was using it to make make a living?

[Matt Sova]

Business

If the seller was using it to make a living then it is a business asset reported on 4797. That is not the case in this scenario. Owner does not play, it was given to her by her aunt. Her basis is the aunt's basis. If aunt is still alive she should call the aunt and ask her what it cost her originally. Who knows, maybe she bought it for $20,000.

TTB Page 6-7 "Collectibles include works of art, rugs, ANTIQUES, metals (gold, silver, etc.), gems, stamps, coins or alcoholic beverages and certain other tangible property."

Matt

[Lion]

Violin

One of my clients teaches violin. Her bow cost $6,000! Can't remember what we're depreciating her violin for; might be on loan to her so she just insures it. Call the aunt or someone who knew the aunt when she took up the violin.

[John of PA]

So........15% or 28%

So getting back to the origianl question, though the basis issue is a good one; am I looking at 15% or 28% on this gain. I'am afraid it's 28% unless someone can come to my rescue here. She is not a collector or a muscian, but is just selling a very good violin her aunt gave her.

[jainen]

My guess is--not

It doesn't matter whether she is a collector or a musician. The criteria is collectible, not collected. So call the aunt or the buyer or a music store and find out if it was an antique, the only category of collectible likely to apply. My guess is--not.

[Dennis V]

Antique

But antique can have a different meaning to different people. My wife plays a violin made in 1774. If she sells it, I wouldn't classify it as an antique. Of course, she uses it in her business, so it is business property and that makes a difference. But it is still functional business property. The term antique in IRS literature is often used in conjunction with works of art, paintings, sculptures and other decorative items. I wouldn't call functional business property a work of art, and so wouldn't classify it as an antique. Just because something is old doesn't make it an antique.

[Matt Sova]

Does not apply

But antique can have a different meaning to different people. My wife plays a violin made in 1774. If she sells it, I wouldn't classify it as an antique. Of course, she uses it in her business, so it is business property and that makes a difference. But it is still functional business property. The term antique in IRS literature is often used in conjunction with works of art, paintings, sculptures and other decorative items. I wouldn't call functional business property a work of art, and so wouldn't classify it as an antique. Just because something is old doesn't make it an antique.

This situation does not apply in this scenario. Let's say your wife quits playing and she GIVES her 1774 violin to her niece who does not play. Guess what, her niece's basis is your wife's basis (cost less depreciation taken). Now assume this thing is really worth a ton of cash and it was fully depreciated by your wife. The niece takes it Sotheby's and it sells for $1.2 million dollars. The niece will have a 1.2 million cap gain taxed at 28%. It was NEVER her business property, to her it was an antique. Even if the new buyer plays with the NY Philharmonic and will use it as business property.

[John of PA]

Antique?? Well YES

It doesn't matter whether she is a collector or a musician. The criteria is collectible, not collected. So call the aunt or the buyer or a music store and find out if it was an antique, the only category of collectible likely to apply. My guess is--not.

I just found out the Violin was made in Europe in the 1700's and is worth much more than she thought. I guess that makes it an antique, which makes it a collectible, which makes it taxed at ordinary tax rates; sound correct? Thanks Jainen for you input here.