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Tax Consequences of Selling Collectibles

Collectibles such as gold and silver coins, works of art, antiques, and stamps have seen significant appreciation in value lately. As the buying and selling of collectibles picks up, it is important to be familiar with the tax consequences of such transactions.

If collectibles are sold at a profit, the price increase is treated as a capital gain for income tax purposes. For a holding period of more than one year, the gains are long-term. The downside for sellers is that long-term gains on collectibles are taxed at 28%, not the 5% or 15% rate likely to be used for gains from the sale of other forms of property. To establish the basis, which is the cost of an item for tax purposes, owners of collectibles should keep records of the price paid for the items, as well as records of any expenses related to the items, such as insurance or storage costs. The expenses may be added to the basis, thus decreasing the taxable capital gain when the property is sold.

Someone who inherits valuable collectibles will receive a "step-up" in basis to market value at the time of the inheritance, rather than using a basis determined by the earlier cost of acquiring the property. The new, higher basis means a reduced tax when the property is eventually sold. Inherited collectibles should be appraised right away, so as to establish the value to be used for the stepped-up basis.

This website is not intended to constitute legal advice or the provision of legal services. By posting and/or maintaining the website and its contents, Lucas Law does not intend to solicit business from clients located in states or jurisdictions outside of Illinois wherein Lucas Law or its individual attorney(s) are not licensed or authorized to practice law.

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