The Taxation of Collectibles

Keywords

collectibles tax rates, capital gains rules, tax minimization strategies

Abstract

  • The Taxpayer Relief Act of 1997, while lowering the maximum capital gains rate on gains from the sale of most assets to 20%, left the maximum rate on gains from the sale of collectibles at 28%.
  • The types of assets that are collectibles are listed in Sec. 408(m) and proposed regulations. However, the IRS has the authority to specify “any other tangible property” as a collectible for these purposes.
  • Collectible gains also include gains, but not losses, from the sale of an equity interest in a passthrough entity to the extent the gain from the sale is attributable to unrealized appreciation in collectibles owned by the passthrough entity.
  • Special netting rules apply in determining the amount of collectibles gain for a tax year.
  • In certain situations, involving the phaseout of the alternative minimum tax exemption or the Sec. 199A deduction, the marginal rate on collectible gains can exceed 28%.
  • Due to the higher tax rate on gains from the sale of collectibles, practitioners and taxpayers should consider a number of strategies that can reduce the amount of collectibles gains, including structuring a sale of a collectible to recognize gain over multiple years.

Original Publication Citation

“The Taxation of Collectibles” The Tax Adviser (with T. Lewis and K. Call), November, 2019: 766-773.

Document Type

Peer-Reviewed Article

Publication Date

2019

Publisher

The Tax Adviser

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

Link to Full Text

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