Confessions of a Day Trader
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Confessions of an Internet Beanie Baby Day Trader
With the advent of online auctions like Ebay, there is now an international commodities market for almost everything from beer signs to baseball cards to anything with Elvis on it. The frantic pace of new items being auctioned and rapidly escalating bids provides an atmosphere that rivals a virtual Chicago Board of Trade except instead of corn and sow bellies, they’re buying and selling Beanie Babies and wicker baskets.
Meet Doris Maven*, more commonly known by her online auction nickname “Bbabes17”.
“I started as just a social seller. I posted my first item just a year ago, wow, what a rush. The doll that I paid $6.00 for five years ago sold for $265. Now I can’t get enough, I’m online 20 hours a day, sometimes buying and selling the same Beanie Baby five times in the same day.”
If, like Doris, you have ever thought about selling your collection on an Internet auction, there are income tax implications that you should be aware of. Items that you have collected for your personal enjoyment, like Beanie Babies, coins, or stamps are considered personal possessions and as such have the unique position of being taxable when sold for a gain, but, not deductible if sold for a loss. The gain, if any, is treated as a capital gain and is reported on Schedule D with the sales of stocks, and other capital assets. However, unlike stocks, “Collectibles” like Beanie Babies, coins, and stamps, do not qualify for the favorable 20% maximum capital gains tax rates. Instead, “Collectibles” fall into a category that is taxed at a maximum rate of 28%. This could still be better than your regular income tax rate, but is still not as favorable as stocks and other property held for investment.
The rules would get even more complex if, like Doris, you make a profession out of buying and selling items. At that point, you have become a “Dealer” in collectibles and the items being bought and sold are inventory. The income or loss from the sale of the items would become business income or loss and subject to a whole other set of rules that could occupy another set of articles.
For additional information regarding reporting the gains and losses on capital assets, see IRS publication 544, Sales and Other Dispositions of Assets, or IRS Publication 550, Investment Income and Expenses. |
