My dad gifted me his substantial book, coin & stamp collections between 2005, 2006, 2011 &2012. The books are worth $250,000. How is this handled in my taxes. He died in 2013.

[skydealer]

My dad slowly gifted me all of this collections before he died.  In 2005-2006 this included nearly 1000 boxes of books which he said was worth $250,000.  He was a book dealer and these were his best and private books.

In 2011 He gave me his coin collection which was valued at $125,000 back in 2011 (it's worth about $66000 now because the price of silver has dropped).

His stamp collection has a catalog value of $175,000 but, with stamps (and coins to a letter degree) the Scott's catalog value is for insurance purposes and not what the stamps actually sell for.  In reality the $175,000 stamp collection has a market value of only $12,000-15,000.  Yes - stamp collection is that bad!

Since this is several huge collections it will take years to sell.  I just held onto everything and figured it would be my retirement job to slowly sell these off.  The fair-market-value was determined by my dad on the books since he was a dealer, the stamps were cataloged at the time and the coins basically went by the melt value of silver and gold at the time of the gifts.

Will I get charged for high taxes for selling these or since they were a gift can I legally use the FMV from my dad's estimate on the book collection?  He didn't file anything with the IRS at the time of the gifting and there was not any cash gifts involved.  It would not be possible to find what he paid for all these items as they were collected since from 1930s to 1980s and some items, such as the coins, were passed on to him when his parents died 30-40 years ago.

I'm wondering how this will be handled come tax time.  I'm retired now and currently selling about $1000-$2000 a month (gross sales) on the old books.  I am not buying anything to sell and everything I plan on selling were gifts from my dad.

[AmyC]

Well, your dad inherited a little of it. The inherited value of those items on the date of death of his parents, would be your dad's basis in those items. He gifted them to you. When he gifted you items, his basis became your basis.

The rest of the items that he gifted to you will all be based on what he paid for them.

Most parents don't understand inheritance laws and your dad was being kind gifting them to you. Had he let you inherit them, you would have received fair market value at death. Instead, his basis is your basis. Without any kind of proof of basis, there isn't much you can do.

Reconstruct what you can so you are not paying taxes on the full amount.

On the bright side, these are long term investments and the capital gains tax rate is zero for single filers with taxable income below $40,000, MFJ below $80,000. So, if you finagle your finances, you may not have to pay tax on it at all.

[skydealer]

Thank you for the answer.  The stamps and books were all purchased by my father but records are limited as they were collected since at least the 1960s and some as early as the 1930s when he was a kid.  He always referred it as being my inheritance but he decided to start slowly giving it to me before he passed.  When my father and his wife passed away in 2013 some items were still in the house but were not listed on the wills.  My stepmom, who was sole owner of the small house, had her will stating me as the sole inheritor but since nothing was specifically listed when the will was processed through an attorney since all went to me and the entire estate was worth just around a couple hundred thousand max.  I assumed all the coins were my fathers but there were several bags of coins that were found my my stepmom's closet when the house was being cleared out after the estate was closed and my dad's townhome still had a few dozen boxes of books and stamps in it but they were nothing special as he had already sent over the bulk of everything to me.

I was executor of all of the wills.  My dad, mom and stepmom all passed away in the span of a year so there was a lot going on at that time.  My dad and stepmom died a month apart... dad fell and broke his hip and my stepmom was already in a nursing home with advanced dementia.  That was a bad year for us all. 

Is it correct that long-term capital gains taxes on collectibles is still 28%?  The books will be difficult because if I sell them as per my father's wishes (which I plan on doing) this would mean slowing selling them one at a time which could take at least 20 years.  There's no way to individually determine the book purchase price because it was common for my dad to buy out entire collections and pick out a few for his private repository, then dispose of the rest.  I did find records of 90% of the shipping costs.  My dad wanted to repack the boxes so he could go through them one last time so we slowly shipped them to me by USPS and UPS between 2005 and 2010, which was a longer time-span than what I originally thought and mentioned in the initial posting.

I read where the tax laws on deductions were slashed in 2018 as far as some investment expenses under the Tax Cuts and Jobs Act of 2018 but would that include the costs I had to pay regarding having the books shipped to me and the additional costs I had to pay to have them shipped to a new address when I had to move because of my job?  That cost me an additional $8000 in moving costs because of the weight alone.

Does it also mean it is incorrect to determine the fair market value (FMV) of the coins at the time they were given to me?  I have received both yes and no answers on this one when I asked on other forums, which is why this is confusing.  The FMV on the coins would be determined just by the price of silver at the time of the gift was given.  Does it matter that my dad considered everything part of my inheritance even though most of it was placed in my possession prior to his death? 

Sorry about the long posts but this is all pretty overwhelming.

[DaveF1006]

It depends. According to this link from IRS.gov., the basis of property inherited from a decedent is generally one of the following: I realize that this publication addresses money but it also means all capital assets used for investment purposes. 

• The fair market value (FMV) of the property on the date of the decedent's death (whether or not the executor of the estate files an estate tax return (Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return)).
• The FMV of the property on the alternate valuation date, but only if the executor of the estate files an estate tax return (Form 706) and elects to use the alternate valuation on that return. See the Instructions for Form 706.

Yes, the long term capital gains on collectibles is 28%. As far as investment expenses, IRS publication 550 defines what investment expenses are deductible. Looking through the publication, I don't see any reference to claiming an expense for the transport of collectibles.  I have looked for other references and cannot find anything that would justify the expense so i will have to say that I would advise against claiming this expense.

I realize this was all overwhelming for you and I wish you luck for a favorable outcome. If you have any additional questions, i am here all day so repost if you need to.

[skydealer]

There was also a lot of books left over in the house when my parents passed.  They died a month apart and I ended up being the one who got all the household items.  Does selling those books also fall under the same ruling or since I inherited them would they be treated different as far as taxes?

[AmyC]

My initial post I did not mention the alternative valuation as I imagined it would be greater but am glad to see Dave added it. I have thought about you a good bit.

All the inherited items would be valued at the date of death unless you had them appraised separately for the estate. All of your items would be long term capital gains.

See pages 39 and 67 of Publication 550 PDF for basis and capital gains information.

I wonder if instead of selling these as a collector, it may be worth becoming a business so that you are taxed at ordinary rates. See Planning and Tax Considerations for Collectibles - The CPA .

See Small Business and Self-Employed Tax Center for everything you need to turn into a sole proprietor business. I think this may be a good solution for you. Blessings!