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Post by rhinomilk on Apr 23, 2008 8:20:30 GMT -8
Suppose I was an honest tax paying citizen.... I was wondering, suppose I wanted to buy a piece at a gallery for $20,000 and I decided to sell my entire collection to raise $15,000 and I made $10,000 in profit, and paid the rest off with cash in hand.
What would be best course of action? can I say I used the profit in the sale for another piece to avoid taxes? If not, can you set up a corporation to do this?
Just making up the numbers (as i'm not really shopping around for a $20K piece), I'm just curious... as I heard that if you get really hardcore into collecting stuff, it may be ideal to start a corporation
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Post by comiconart on Apr 23, 2008 8:40:51 GMT -8
Well...profit is profit, so it doesn't matter what you end up doing with the profit once you make it...you still owe taxes on it. That's if you are more honest than every other art collector I know.
Not sure about the corporation route...
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Post by highbrow on Apr 23, 2008 9:01:44 GMT -8
As I have never sold anything from my personal collection and only one piece which I made zero profit on. I would assume the only way you would have to really have to pay taxes would be on a large sale when you make a deposit into your bank for over XXX amount of dollars into your bank they contact the IRS.
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Post by rhinomilk on Apr 23, 2008 9:23:06 GMT -8
well like, what if I had bought the $20000 piece and decided to sell it at a loss of $10,000. sort of sucks that I had paid taxes on the $10,000 profit from before.
of course, then you'd sound like a full blown business.
ok, maybe i'm just rambling. (but i was considering moving my two signed banksys in the event that something very nice and usually out of my price range comes up... and wondering if there was any advice since it would be a decent chunk of change)
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Post by highbrow on Apr 23, 2008 9:34:42 GMT -8
Have the person do multiply paypal, or checks so it doesnt hit your bank all at once.
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Post by sleepboy on Apr 27, 2008 21:09:49 GMT -8
I believe that there is a percentage of the profit that you have pay back to the original artist when you resell as well. I read an article about that somewhere...maybe it's only in california. Does anyone know what I'm talking about? So maybe taxes aren't the only thing you need to worry about although most collectors probably won't be kicking some of the profit back to the artist.
Also, I have recently appraised my collection for insurance purposes. When I re-appraise and the value goes up, I wonder if that means I have to pay taxes on that... Hm......
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Post by oldfartatplay on Apr 28, 2008 3:57:00 GMT -8
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Post by ritedere on Apr 28, 2008 6:32:30 GMT -8
And so sets forth the beginnings of "The Great California Artist Resell lawsuit of 2010"
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Post by kittenagogo on Sept 13, 2008 18:16:28 GMT -8
Since we are in the same tax year, I hope this isn't far too outdated for a response...
If you use the profits to purchase something comparable, you should discuss a 1031 exchange with your accountant/tax preparer, which I believe defers the tax on the proceeds. If the deal is already done, ask about a reverse 1031 exchange. I've seen this used typically with real estate transactions, but I googled it and I believe it may also apply to personal property. If not, see if there is a comparable section for other assets on which capital gains are assessed.
Caveat: My experience with this comes from the legal end, not the accounting side, so definitely check with a CPA for further clarification.
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Post by droow2 on Sept 20, 2008 12:28:05 GMT -8
I believe that there is a percentage of the profit that you have pay back to the original artist when you resell as well. I read an article about that somewhere...maybe it's only in california. Does anyone know what I'm talking about? So maybe taxes aren't the only thing you need to worry about although most collectors probably won't be kicking some of the profit back to the artist. Yeah, I bought a couple of drawings from Justin Bua a few years back and had to sign a contract promising to kick back a percentage of any resale?! never seen it anywhere else though.
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Post by sleepboy on Sept 20, 2008 14:01:42 GMT -8
On an unrealated note... If you buy a painting for a "charity" event, does that mean you can claim it off your taxes?
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Post by sketchypad on Sept 20, 2008 18:06:44 GMT -8
I think the amount you can write off is the amount you paid above the suggested retail price of the piece. See this article: www.artinfo.com/news/story/28135/charity-cases/"Overspending is encouraged by the current tax laws, which allow a buyer to deduct the difference between the suggested retail price and the hammer price. " On an unrealated note... If you buy a painting for a "charity" event, does that mean you can claim it off your taxes?
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