wrote:

- quote -

What if it wasn't noted? For instance, a watch that's just
lumped in with "other personal property" whose total value
(per the estate) is less than that of the watch itself?

Seth

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J. Patrick Brandt wrote:

- quote -

If it was something that YOU bought years ago (and now find
to be worth considerably more - watches are a good example)
then your "cost basis" is what you paid for it. i recently
found that to be the case with a dashboard watch that I paid
about $80 for in 1961. It is currently worth about $2,000 on
eBay! If I sell, I have to pay the taxes on the difference
(long term, collectible, up to 28%).

If you inherited the item (from mother, father, rich uncle,
etc) your cost basis is the FMV of the item on the date of
death. Unless an appraisal or evaluation of FMV was done at
the time, determining this may take some work. If the
decedent had a "taxable estate", the information should be
available from the Executor of the estate.

If someone gifted the item to you, your "cost basis" is
either the cost basis of the giftor OR the FMV of the item
on the date of gift. Which one you use depends on whether
the item is sold for more or less than the giftor's basis
(it's complicated).

As you note, the vast majority of the "stuff" we all have is
generally worth LESS (sometimes a LOT less) than what we
paid for it. Most yard sale items fall in that category. If
it really is worth more, or a desirable collectible, a yard
sale is not the place to try and sell it for its value.

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"J. Patrick Brandt" <null[at]void.net> wrote:

- quote -

I guess you missed the first big ticket item, the $400,000
side table. I love that Titanic lunch menu, IIRC it was
estimated to be quarter of a mil also.

- quote -

In that case, there was actual documentation of how much
that guy's grandfather paid for it. But of course the cost
basis changed when he inherited it. He'll have to get an
estimation from an expert of how much that watch would've
been sold for when he inherited it. For that $400,000 side
table, the owner paid $25 for it originally.

- quote -

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Theres a special capital gains rate for collectables - 28%.
Not as good as long term; not as bad as high bracket short
term.

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J. Patrick Brandt wrote:

- quote -

I think that this is an area that the IRS is lax in. The
last time I had an estate audit (last decade), the
estate/gift Revenue Agent didn't have a problem agreeing to
a small number like $4k to cover ALL household items of the
decedent's residence - despite the fact that just 3 of them
would have been or exceed that amount by themselves.

To answer your specific questions:

Selling personal items at a GAIN is and always has been
taxable. For inherited items, the valuation of basis rules
are well known. For this type of item, one would also need
a HISTORICAL quote as to value as of when he came into it.

None of my clients bother tracking their personal
possessions. I personally track mine - for two reasons:
Insurance issues, and to defeat the IRS on an "economic
reality" audit (where a taxpayer has spent more than his
income). The IRS cannot use "Bureau of Labor Statistics"
averages if the taxpayer has a surviving record of his
ACTUAL personal living expenses. This is beyond what most
people will do. [Part of PLE is the accumulation of
household and personal possessions, at least for tax
purposes.]

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"J. Patrick Brandt" <null[at]void.net> wrote:

- quote -

If you don't have records showing how much you paid for it,
or when you purchased it (so that you can estimate the
likely cost at that time), you might be forced to assume a
basis of $0.

But even if you do know the cost basis, it probably won't
make much difference. If it was bought in 1914, it probably
cost under $100. Subtracting the cost basis will reduce the
capital gains tax by $10. That's probably less than the
margin of error in determining the value of the watch (they
probably rounded off to the nearest $10,000).

--
Barry Margolin, barmar[at]alum.mit.edu
Arlington, MA

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I just saw the most expensive item I have ever seen on the
"Antique Road Show" program. A gentleman had a 1914 pocket
watch that the host said was worth $250,000. Holy cow!

Then, I was thinking, gee, if I had a family heirloom like
that, and sold it, surly someone from the IRS would wonder
about that $250,000 check I deposit.

What are the tax implications of something like this -- just
"stuff" around the house. Normally, when I sell stuff at a
garage sale, it certainly doesn't go for more than was paid
for it. What if I did make a profit on something? If
something like this is taxable, how the heck do you prove
your "basis"? etc.

Thanks to those of you who know this stuff for satisfying
our curiosity.

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