Collectible

[Kram BergGold]

My client was given a vase when he was a child. He just sold it for $150,000. My question is, if a person owns one vase as oppossed to a collection of vases would it still be considered a collectible subject to 28% taxation?

[Roland Slugg]

Probably

Dear Kram BergGold

My 2008 RIA Federal Tax Handbook defines a collectible as "Any work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or any other tangible personal property specified by IRS for this purpose is a collectible."

I'd lay long odds that any vase selling for $150k would be deemed a collectible by the IRS. If the taxpayer insists on treating is differently on his tax return, it should be clearly and adequately disclosed, and even then it may not pass the new IRS tests for reasonableness. Substantial underpayment penalties could apply, and the amount involved would appear to be substantial.

[ChEAr$]

clarification as to rate

The 28% collectibles rate, that is.

I've never had an instance from a client declaring a collectible sale, so this may be
a (insert your own adjective here) question.

Is the 28% rate statutory in nature? Or is it instead the maximum rate?

I just entered a 9,000 collectibles gain into my program and given low income of my
"sample" return, no tax was created.

[Kram BergGold]

Too little income

If your scenario was no other income other than the $9,000 collectible then the standard deduction and personal exemption would reduce the income to zero so no tax.

[erchess]

I would assume that it is indeed a collectible

but my real question would be how do we establish any basis? The basis of gift property is generally its adjusted basis in the hands of the donor immediately prior to the gift. So we would need to know how and at what cost they obtained it. The scenario sounds like a nightmare to me.

[Deborah]

The basis would be

The basis would be the "value" at the time your client received the gift - not what it was purchased for - unless, of course, it was purchased and then immediately gifted. But if the item was something that had been "passed on" - then it would be the value at the time it was gifted. There may be no way to know which it was but something of that value, I would think, could be researched as to what its value was in the past or what an annual appreciation % would have been.

[WhiteOleander]

The basis would be the "value" at the time your client received the gift - not what it was purchased for - unless, of course, it was purchased and then immediately gifted. But if the item was something that had been "passed on" - then it would be the value at the time it was gifted. There may be no way to know which it was but something of that value, I would think, could be researched as to what its value was in the past or what an annual appreciation % would have been.

I believe the basis of a gift is the basis of the donor. Not the FMV at the time of the gift.

[Roland Slugg]

Clarifying the 28% rate

The 28% federal tax rate is the maximum rate the LTCG on collectibles may be taxed, not a fixed rate for every dollar of that category of gain. In this regard it works similar to the 15% LTCG rate which, if overall income is low, can actually be just 5%.

[Davc]

I believe the basis of a gift is the basis of the donor. Not the FMV at the time of the gift.

Correct. To get a FMV basis more than just the item in question must pass on.