November 23, 2011 1:46 pm

Gains and Losses on Collectibles

Stocks, bonds, precious metals, and real estate are not the only types of investments in which to make money. Today, in light of outlets popularizing art, antiques, and other collectibles, such as eBay and PBS’s Antiques Roadshow, many people own these alternative assets for investment. In fact, it has been estimated that 10% to 15% of taxable estates are comprised of collectibles.

Collectibles held for personal or investment purposes long-term and sold at a profit are subject to special tax rules. While the tax rate on most long-term capital gains is capped at 15%, the rate on collectibles is 28% for taxpayers in this tax bracket or higher.

Losses. Loss on the sale of jewelry, coin collections, art objects, and other collectibles held for personal use is not deductible.

Loss on collectibles held for investment results in short-term or long-term capital loss (depending on how long you owned the items). If the IRS questions your return, an investor must be prepared to show that the motive or reason for owning the items is investment. This can be difficult when items are displayed in your home or used in your daily life. For example, jewelry you wear is usually is viewed as personal use items; jewelry bought and stored can be treated as investment or business property (depending on the circumstances).

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Factoids
FACT: 

Noncash donations

For 2009, 21.9 million individual taxpayers who itemized deductions reported $31.8 billion in deductions for noncash charitable contributions. Corporate stock donations accounted for the largest percentage of total noncash donations, followed by clothing donations.

Source: Statistics of Income Bulletin, Spring 2012

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