Definition of Disney Collectibles for tax purposes

[exsocal8]

I have a large collection of Disney trading pins.  I have sold some in the past for a good profit per pin.  My tax consultant stated that these sales qualify as collectibles and should be included on Schedule C.  I'm concerned to do this because of the specific definition of collectibles.  Any suggestions?

[ThomasM125]

According to the IRS code section 408(m)(2), a collectible could consist of an item made of metal or a gem, which may describe the trading pins you mention, though they are not specifically mentioned. The general definition of a collectible is something you acquire more for personal purposes than as an investment meant to generate income. 

As far as reporting it on a Schedule C, that is reserved for reporting business income and expenses. In order for your activity to be considered a business, you would generally have to have a profit motive for the activity and would have to devote a significant amount of time and effort to it. This is in contract to an investment, where you simply purchase something and hold it with little if any personal effort or interest in it outside of selling it at a profit. 

This Intuit article discusses the difference between a business and a hobby, you may find it helpful in distinguishing your pin collecting activity from a business. 

[rilandon]

form 8949 is how you report gains , including for gains with collectables, see the instructions for the code to use..
https://www.irs.gov/pub/irs-pdf/i8949.pdf

You advisor may have good advice for you , if you buy & sell the items often and might have expenses related to that activity, you might do better if you do claim it as a business and do a Sch C , then you can deduct the costs.. 

[exsocal8]

I made a huge mistake on my first comment.  I should have stated that my tax advisor indicated that I report the sale of the pins which I had purchase receipts for as collectibles on Schedule D (not C) as long term capital gains.  For other pins for which I didn't have purchase receipts I would report as a hobby.   This is the first time that I have ever sold anything from my collection so I believe that I'm within the definition of a hobby.  Thank you. 

[MonikaK1]

If you meant in your original post to elicit suggestions as to how to report the sale of specific items classified as collectibles on Schedule D:

Yes, it's appropriate to consider collectibles as capital assets and to report the sale on Schedule D. Capital assets include personal items like stocks, bonds, homes, cars, artwork, collectibles, and cryptocurrency. You need to report gains and losses from selling these assets.

If you hold assets for a year or less, they're considered short-term and usually taxed at ordinary income tax rates. If you hold them for more than a year, they're long-term and typically taxed at a lower rate. 

The IRS classifies collectibles as tangible personal property—such as art, antiques, coins, stamps, wine, and gems—that appreciate over time. Sales of these items held over one year are taxed as long-term capital gains at a maximum rate of 28%, significantly higher than the standard 15%–20% rate. See IRS Topic 409 for more information.

You may need to use Form 8949 (TurboTax will enter information on that form for you based on your answers to interview questions) to detail each capital asset transaction, including company name, acquisition and sale dates, purchase price, and sales price.

See this TurboTax tips article for more information.

@exsocal8