Sale of Collectible - Is IT

[S T]

Taxpayer has Parkinson’s and is in Long Term Care Facility - Cost is exceeding income and yet too many assets to qualify for any assistance.

Brother has power of attorney for both medical and financial, as well as successor trustee on Trust of taxpayer.

Brother needs to sell some assets to cover the rising cost of nursing home long term care.

Taxpayer purchased a hand made “Rocking Chair” from a well known WoodworkerArtist in the early 1980’s for approximately $ 20,000. - Yes a piece of “ART” I have seen it and sat in it! And the Craftsman has a well known gallery!

As no one in the remaining family is interested in this “piece” the brother has contacted Auctioneers and the “Rocking Chair” has been transported to a Gallery in NYC where an auction will take place.. The anticipation is that the “rocker” will sell for an amount of 50K - $80K. There are some costs involved i.e, transport, auctioneer fees, etc.

The Auctioneer group states they will NOT be issuing any form of tax statement, just wiring the funds directly to the bank account. Wondering why NO 1099 tax reporting?

For tax purposes this would be reported as a sale of collectible, taxed at ordinary income rate with a cap of 28%, correct?

Thanks

Sandy

[Rapid Robert]

"The Auctioneer group states they will NOT be issuing any form of tax statement, just wiring the funds directly to the bank account. Wondering why NO 1099 tax reporting?

For tax purposes this would be reported as a sale of collectible, taxed at ordinary income rate with a cap of 28%, correct?"

Neither a 1099-B nor 1099-S would be appropriate, nor do any of the boxes on 1099-MISC appear to apply. Not sure what other form would be used?

Yes, it would be reported as sale of a collectible. This is not ordinary income, rather it is taxed at a maximum capital gain rate of 28%. If you figure your tax using the maximum capital gain rate and the regular tax computation results in a lower tax, the regular tax computation applies.

As shown in that other thread here recently about "do you understand basic tax rates", it make a big difference whether it is ordinary income or capital gains, regardless of the exact rate.

[taxea]

Is there a document from the Auction company that describes the item as a collectible? Did they appraise it? I would include that with the return.

[Rapid Robert]

Is there a document from the Auction company that describes the item as a collectible?

It's not the job of the auction company to determine whether it is a collectible for tax purposes. But the definition in the code is pretty clear.