THE ABC'S OF INCOME TAXES AND COIN COLLECTING

WHEN IT COMES TO TAXES, THE ALPHABET IS ONLY THE BEGINNING

- BARRY SUNSHINE

Coin collecting is a very non-financial but financially rewarding hobby or investment. Over time, some collectors can create great wealth with coin collecting. While coin collecting can earn a collector a profit, sometimes a handsome one, some very serious income tax consequences cannot be overlooked.

Let’s start with an example: A collector named Sam desires to create an Indian Head cent collection. Indian Head cents were minted from 1859 until 1909 by the U.S. Mint. Sam attends a coin show and buys an Indian Head cent for $750 from a dealer. The following month, Sam goes to another show and sees an upgrade to the Indian Head that he previously purchased, this coin priced at $1,500, but the price is more than he wants to spend. So, the selling dealer suggests trading the coin that Sam owns by giving a trade-in allowance of $850, with Sam adding $650 cash. Sam agrees to the trade and gets his upgrade.

After collecting for several months and buying coins for his collection, Sam sees a Bust coin and desires to collect Bust coinage, but he realizes he cannot collect both Indian Head cents and Bust coinage due to budgetary means. So, at the next show, Sam sees that wonderful Bust coin that he has to have. So once again, Sam wants to trade an Indian Head cent to the dealer, but the dealer does not want to do the trade. Sam sells his collection to another person for cash, then purchases that Bust coin to start his new set.