Discussion:Carryforward loss on "collectibles"

Thanks

taxbilly

What if he doesn't wreck it? But just parks it in his glass garage for all to admire, meanwhile the market for '65 vettes gets the air let out of the tires, and it is sold for $8,000 less than he paid for it? Now what is your answer?

Why don't we pick something that's *not* susceptible to being "personal use property" and ask if the loss from its sale is a deductible capital loss, and if there's an excess can it be carried forward. When you, Kevin, introduced the '65 Corvette and the Chippendale whatever, you, Kevin, took away the legitimate tax question that was asked. I think TaxBilly has the right answer. Absent "personal use" - which is going to be a factual question in any case - there's no reason to say that capital losses on collectibles are *any* different from capital losses on other capital assets, right?

Billy, you were right all along.

Yes, that sounds fairly accurate.

"The OP doesn't tell us, so the question is not quite fair, or rather is 'loaded.'"

I think WingCPA/OP deserves better than this. Just an opinion, not a criticism.

Is it in quotes because of the factors Kevin mentions, or is it something that might not normally be considered a collectible? I can think of a client who asked me about a Commodore 64 computer she found in a box in her father's cellar when he moved out of his house and she began living there. Collectible?

Look at the discussion about charity vs non-business bad debt and see how it turns as more and more facts come out of the woodwork.

A piece of jewelry custom made by a craftsman for the person who purchased it and has worn it off and on over a period of 30 years. The piece has appreciated due to the popularity of the work of the craftsman, who is now deceased. Is this item a work of art (Sec. 408(m)(2)(A)) or as something else specified by the Secretary (Sec. 408(m)(2)(F))? I haven't found any pronouncements or controversies discussing the issue. -- Larry Hess, CPA | Albuquerque, NM

No Corvettes, no Jackie O, no trees and forest, okay?

Who wants to answer this part of OP's question?

For example (I know how you hate examples, Harry, but bear with me) I 'collect' George Rodrigue art. I have two original Blue Dog paintings, one Cajun person painting, and one of George's early Oak Tree paintings (each of which cost $15,000 to $25,000 when purchased, one particular one is worth abut $50,000 10 years later). In addition, I have about 15 or 20 silk-screen serigraphs which cost $1,200 to $2,800 each (now also worth about double what I paid - to the right buyer - some have tripled in value according to my appraisals and the gallery prices on remaining copies of the edition post Katrina damage of New Orleans). I have so much George Rodrigue artwork that it isn't all displayed - about half is in storage. Others are at my office and, yes, even in the bathrooms at my office (who else puts up $2,500 works of art above the toilet?)

The artist is still alive, but his works go up in value every year, especially his older works. He no longer works in oil, so an earlier work I have in oil has gone up considerably due to the uniqueness.

Since I obviously don't even display all of it at once, am I collecting it for its potential price appreciation, or am I collecting it for the sake of art appreciation itself? Or am I just as crazy as the beanie baby collectors who need to get a life?

If I had no regard for the art at all, I could probably demonstrate an investment intent. Because I do display some of it at home and at work, it would be harder to state that I bought the pieces purely as an investment.

So there you are, Harry: a solid MAYBE.

(p.s. many of my pieces are in published books of his artwork - helps with the Provenance and increases the value as a collectible)

So if one of your paintings is sold at a considerable loss (sold for 500), say the 25k one, would you be willing to sell the one that appreciated to offset the capital loss? Just wondering if collectors would act in a way where they can sacrifice their precious items =). Or would you rather not sell the painting and just keep it?

Anybody want to point to an authoritative cite for either of these?

Kevin, if you *had* to sell a few of your precious silk-screen serigraphs but couldn't find "the right buyer" for some of the ones you sold, and had to take a tax loss on those, would you net that tax loss against your gains from the ones for which you did find "the right buyer"?

If I had the opportunity to buy a better known work or a better piece by another artist, I could see wanting to come up with some cash, and a collecter might be willing to take a loss on one or two pieces if it meant that his 'collection' would be improved by the replacement piece.

Kevin - my wife has questioned my taste in fine art, so we too have some in the office bathroom.

By that broad definition, an oriental carpet that made my office a place of distinction might qualify, assuming I had not depreciated it.

Do we agree that personal use of a collectible trumps intent in determining if a loss is deductible? If D&T's rug was used in his home would that preclude a decuctible loss? (Irregardless of the damage done by the dog?)

In any event, it is your duty to determine whether this was a personal use asset before claiming any carryover. I would want to have some sort of support for any assertation that it was 'investment property' if you want to support the 1 in 3 rule and avoid preparer penalties, etc.

No need to respond Kevin, I just realized I hadn't gotten back with you. Thanks again.