Is buying/selling a bass a declarable capital net gain/loss?

pjmuck · #1 03-26-2010, 10:12 AM

Like most musicians I know, I've purchased and sold instruments via ebay or classifieds. I just read that profits (or losses) resulting from the selling of "collectibles" (i.e. coins, art, or vintage instruments?) could be considered a capital net gain/loss and subject to tax declaration. Is this true and would I be required to declare them for taxes? I sold off a few items on ebay last year.

Ed Fuqua · #2 03-26-2010, 10:17 AM

Did you sell a collectible or did you sell something you played? I don't think they are talking about working musicians selling the tools of their trade in this case. The thing you DO have to worry about is if you bought the bass two years ago and deducted the full expense on your return. The only time that you DON'T have to declare the money (less depreciation) is if the instrument has fully "depreciated" in the eyes of the IRS; there's a timetable.

pjmuck · #3 03-26-2010, 10:35 AM

I've never bought an instrument for the sole purpose of flipping it for profit, so yes, I do play them over time and after the love affair is over I sell them. I can't recall if I claimed the full value of the instruments or not last year. I'll have to go back and check. But you bring up an interesting point and something I need to determine not only when filing taxes but also in dealing with an insurance claim I am putting through for a recent flood I had where some of my vintage basses were effected.

Do instruments (especially vintage/collectibles) really depreciate or appreciate? Maybe the IRS doesn't care as long as you're itemizing it and/or depreciating it over time, but if I paid $1000 for a '72 Jazz bass 7 years ago it's certainly not worth $1000 today, so I'm wondering of the value needs to be re-assessed every year. Certainly regarding my insurance claim, I'm wondering how they determine the value (and loss) of a vintage collectible. You certainly wouldn't want them depreciating a '72 J based on it's cost back in '72, nor would you want them to determine value based on what you paid for it.

Ed Fuqua · #4 03-26-2010, 11:01 AM

Don't confuse things unnecessarily.

If you buy a tractor for the farm, the IRS doesn't care if it's a new model John Deere, a vintage John Deere or a John Deere carved from a single diamond and animated by magic fairy dust. You paid X amount for it and you can either 1. deduct X as equipment purchase or 2. deduct X/ Y where Y is a specified number of years and you deduct X/Y for each of those years. If you SELL the tractor before specified number of years expires, you have to pay tax on 1. the difference between what you got (income) less the amount that still has to depreciate (expense). DON'T think of "depreciate" in market terms, think in terms of defined usage - you paid X, it takes Y years to "receive full value" of X. THAT'S IT.

Now if on this farm you collect HELLO KITTY purses, which you buy at the lowest possible price to sell at the highest possible price that's INVESTMENT, and (if I'm understanding this correctly) is similar to any other investing - you are taxed on the income you make form buying low and selling high AND can declare LOSS from buying low and having to sell lower.

But I'm just some guy typing on the web, I have an entertainment accountant do my returns.

MalcolmAmos · #5 03-26-2010, 09:28 PM

Catch your local CPA at the post office and ask him. Free professional advise flows around the post office in most small towns. A call to his office will cost you.

The way I understand it. If you generated income you owe taxes.

tycobb73 · #6 03-27-2010, 07:26 AM

yes you are supposed to claim it, even if it is fully depreciated. It is normal income that if you are using a normal profit and loss statement would be under a catagory called Gain/Loss on Sale of Equipment in Other Income/Expense near the bottom the P/L. The gain/loss is the amount you sold it for minus its book value. Book value equals what you bought it for minus depreciation. So if you fully depreciated it your gain/loss would be what you sold it for minus what you paid for it. I do this all the time with trucks and such. When I do my aunt's books I sometimes get to do it on a horse that was sold or died.