Determining Cost Basis of Hobby Collectibles Acquired More Than 6 Decades Ago - No Records Kept

[RockinRonaldo]

More than 60 years ago I purchased US coins from a retail store. In addition to retail price for my purchases, I also paid applicable state sales tax. During the time of my purchases (over several years) I was an avid hobbiest adolescent coin collector. I loved coin collecting (purchases as well as finding coins of interest to me in circulation) and my keen interest in this past-time as a youngster lasted for several years until my interests shifted to other activities. I never kept any records of what I paid for the coins I purchased nor the dates on which I bought them. I never gave any thought to acquiring them as a money-making hobby. I am now trying to file my 1040 Income Tax for last year (2022) when I sold some of the coins. I want to file an accurate and honest return. Can anyone out there in TurboTax Land provide information to help me answer the question I am trying to properly address and to enhance my knowledge base?

[GeorgeM777 · Accepted solution]

Based on what you included in your post, it appears the coins were personal property and not investment property.  As such, any gains from the sale of the coins would be considered a capital gain and reported on your tax return.  Any losses realized in connection with the sale of personal property are not deductible.  You would still report the sale even though it resulted in a loss; however, when you report the sale you can report the cost and the sales proceed amounts as the same resulting in no gain but also no loss.  

You indicated that you do not remember your cost basis because the coins were purchased many years ago.  Assuming you have exhausted all reasonable research methods, (numismatic experts, coin clubs, etc.) you might consider just using the face value of the coins as a basis.  To avoid unreasonable speculation, presumably when you purchased the coins, the seller sold them at their face value plus a mark-up.   However, given the passage of time, and the unique character of the items at issue, it will be difficult to determine your cost basis and therefore, you will need to do the best you can to arrive at a reasonable cost basis. 

Sales of this type are entered in the Investment and Savings section of TurboTax.  As the coins are a capital asset, their sale information will appear on Form 8949, Sales and Other Dispositions of Capital Assets, and Schedule D.  Here are the steps to follow to enter your coin sales if you are using TurboTax online.

1. Sign-in to your account.
2. Select Federal in the left margin.
3. Select Wages & Income, left margin.
4. On Your Income and expenses screen scroll down to Investment and Savings.
5. Click on the drop-down arrow if necessary to reveal more options.
6. Click Start/Revisit across from Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B).
7. At the screen Let's import your tax info, you will see the option to Enter a different way.
8. Then select the type of investment.  For you it will probably be Other.
9. Continue to enter information as prompted.
10. At the screen Now, choose how to enter your sales, make the appropriate selection.
11. Enter your coin information. 

Did you sell any of these coins through an online portal/processor, such as eBay, Amazon, etc.?  If so, did you receive a 1099-K?  Please follow-up with this information if applicable.  

@RockinRonaldo 

[fanfare]

Are your coins rare enough to be worth a lot now?

If you don't have basis records, IRS considers your basis to be zero.

collectibles are taxed at 28%.

add state tax and you are giving a third or more of your money to the "go'mnt".

For this reason many do not report their coin activity.

@RockinRonaldo 

[RockinRonaldo]

Greetings and a huge thank you for your detailed and well-written response to my question. I am grateful for the time you spent to help me. Since it is late in the evening, I will study your reply first thing in the morning. I may need to get back to you for a little additional clarification.

[RockinRonaldo]

Thank you for your response to my post. You have given me an entirely new perspective regarding my situation and my limited knowledge on how to deal with this issue.

[ee-ea]

The 1962  "A Guide Book of United States Coins" 15th Ed by R.S. Yeoman, The Red Book is on EBay  for 4.50.  

[Old collector]

I find myself in a very similar situation, but have not yet sold any of the old coins.

However, two other possible considerations are:

1)  Donate to a charity.  They'll give you a receipt for the current value.  Your cost becomes irrelevant.

2)  Leave them in your estate.  The heirs will get to use the present value as their cost basis.   

[Opus 17]

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@Old collector wrote:

I find myself in a very similar situation, but have not yet sold any of the old coins.

However, two other possible considerations are:

1)  Donate to a charity.  They'll give you a receipt for the current value.  Your cost becomes irrelevant.

2)  Leave them in your estate.  The heirs will get to use the present value as their cost basis.   

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2. OK.

1. No.  If you donate tangible personal property to a charity, you only get fair market value if the charity intends to keep the items and use them for their intended purpose.  If the charity is going to sell them to raise funds, your tax deduction is your cost basis.  (For example, if you donate a painting to an art museum that intends to keep it in their collection, you can claim FMV.  If you donate the painting to a charity fundraiser and they sell it to raise funds for their operations, you can only claim your cost basis.)

See publication 526, page 11-12.

https://www.irs.gov/pub/irs-pdf/p526.pdf

[Old collector]

Interesting point.  As I read it, what you say is true, if: "You donate tangible personal property
with a claimed value of more than $5,000...".

What I didn't see is if that is $5000 total per year, or $5000 per charity in a year.

[Opus 17]

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@Old collector wrote:

Interesting point.  As I read it, what you say is true, if: "You donate tangible personal property
with a claimed value of more than $5,000...".

What I didn't see is if that is $5000 total per year, or $5000 per charity in a year.

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First of all, the requirement that you can only deduct your cost basis applies to all tangible personal property put to an unrelated use, not just property valued at more than $5000.  See "Giving Property That Has
Increased in Value" starting on page 11, and especially Exception 5a on page 12.  The $5000 limit dictates when you must include a form signed by an appraiser and an official of the charity.

As far as when is the form needed, this is part of the IRS instructions:

Deduction over $5,000.

You must complete Section B of Form 8283 for each item or group of similar items for which you claim a deduction of over $5,000. (However, if you contributed publicly traded securities, complete Section A instead.) In figuring whether your deduction for a group of similar items was more than $5,000, consider all items in the group, even if items in the group were donated to more than one organization. However, you must file a separate Form 8283, Section B, for each organization. The organization that received the property must complete and sign Part V of Section B.

For example, coins worth $6000 are a "group of similar items" and must be reported with an appraisal and signed form 8232.  If you donated the coins to two different charities, you need two forms (one signed by each charity) because the total is more than $5000 even though each charity received less.  (But again, if the charity is going to sell the coins, that is an  unrelated use, and you can't claim the appraised value but only your cost basis.)

Also, I have seen questions here from people who might have given away all the contents of their parent's house after they died, clothing, used furniture and so on, and did not get an appraisal.  They might ask "Can I call used clothing one group, and used furniture another group, and used appliances a third group, and if each group is $4999 or less, I can deduct the entire donation without an appraisal?"   I don't have a legal answer, but in my lay opinion I would consider that  significant risk if they were audited.  So I would be cautious about trying to donate more than $5000 of a collection without the proper documents, even if you split it among different charities.