No. You have a basis of $5,000, so your income is zero.
Except that eBay will 1099 me and show $5,000 in sales.
And this:
…seems to contradict @Exapno_Mapcase’s interpretation of my previous scenario (where I got $5,000 that I did not have before).
mmm
If you have a reasonable way of estimating the fair market value of the comics when you received them, you have that as the basis that you can offset against the sale proceeds. If they were ten comics that were 25 cents each, your basis is $2.50 and your gain is $4997.50.
Same as if I inherited a lot of land from my parents in the back of beyond worth $5000 and now, 40 years later, it’s adjacent to a massive multi-use development and is now worth $500,000, when I sell it my gain is $495,000. If I trade it for a 1930 Duisenberg that is worth $500,000, your gain is still $495,000. If you trade it for another lot of land, you may be able to defer the gain.
I’m not sure what “similar property” to old, now valuable comic books would be. You’d need to consult a tax expert.
Technically, barter is still considered income. But it’s harder to substantiate.
You still have reportable income of $5,000. You’d have to fill out the Schedule C form for any expenses that you had. Whether the IRS would allow the deduction depends on stuff. I’d say normally it would be allowed - that’s pretty much how eBay works - but I don’t use the form so I’m not making any flat statements.
Wouldn’t those comics be capital gains?
And if so, I believe mmm would get a certain amount of LT cap gains at 0%, provided his income wasn’t too high
(I am NOT a tax expert; but those comics sure look like cap gains to me)
Only if their total TAXABLE income is below $90k for married filing jointly or $48k for single.
Otherwise the rate is 15%.
Note that Gross Income is often tens of thousands higher than Taxable Income.
But, in that case, even if they were LTCG at 15% and he’s married joint >90k, the marginal rate for him on income is 22%. So he’s still saving by reporting them as LTCG. Unless I’m wrong that an asset which increases in value and is sold is in fact CG?
It’s considered a capital gain, which is a form of income taxed at a capital gain rate.
The capital gain there is $0.
Then you show your receipt that you paid $5000 for them (or just report that expense on Schedule C), and it’s a wash.
Not quite, there is a “gift basis”. It would be small.
Bartering is income.
Yes, but with a cost basis of $5000, and thus no taxable income.
Generally if you sell of household items (like at a garage sale) for less than their basis, you do not have to report that income.
But you did have it before. Last year when you bought them.
It’s odd that everyone complains about tax brackets doing this, when they don’t, but there’s another place where the law does have this effect, but nobody complains about it. Many safety-net programs have a hard cutoff, where if your income is below that cutoff, you get the full benefit, but if it’s above, you get nothing. Worse, many programs use the same cutoff. So if you’re just below that threshold and get a raise, or work more hours, or whatever, you can suddenly be on the hook for your medical insurance, and lose your rent support, and your EBT, and so on. It’s an incentive for poor people to stay poor.
…that’s a very general answer, but I’m genuinely curious about the specifics. Say you already have a $5000 comic book, and you’ve had it for years, and I likewise have already had a $5000 bottle of wine; and say that we don’t, uh, barter; no income, right? But if you trade me that comic book for that bottle of wine, then: what? Did you just earn income? Did I?
This article from Investopedia illustrates the issues.
Capital gains at taxed at 28%. That’s a higher rate than for singles up to $191,950 and marrieds up to $383,900. If you have more taxable income than that and want to save 4% on your $5,000 because you’re in the next bracket, you should already know the answers.
Say you purchased $10,000 worth of vinyl in the 60s. You take the collection to a record store, they look at the condition and offer $100. You accept. Do you take $9,900 in capital losses? No, because personal use of collectables invalidates them for capital losses.
Back to Investopedia
Generally the IRS wouldnt know, but in theory, you each had $5K of income. Let us say - skip the bartering and you sold the comic books to them, and in return they bought the wine from you, both in cash or check, and both for $5000- that would be income, yes? Making it a barter doesnt change that.
Mind you, if this all is just personal property that hasnt appreciated, sure go ahead. You want to exchange your macrame for their cookies and no one cares- unless either are in the business for selling either.
There are also state/local taxes, federal tax credits, etc. that aren’t designed as well as the federal income tax brackets.
Ohio, for example, has a marginal income tax rate of 36,069% on the 26,051st taxable dollar (cite). I can’t imagine very many people fall into the $360 range where that actually reduces their net income, but it’s still bizarre that it exists at all.
Speaking as a volunteer tax preparer, I will add my emphasis to what @Mighty_Mouse said.
Give me your total expenditures, and I’ll accept your figures. The one thing we don’t want to see is a stack of CVS prescription receipts or dental bills or anything else that will require us to sort through and add everything together. I tell my clients that if they can supply proof to the IRS in the unlikely event of an audit, then I’m okay with entering the numbers that they gave me.
Or, ask the pharmacist or dentist for a yearly summary of what you paid. That’s the most accurate method of determining your expenditures.