Another 'Which Bass should I Sell' Thread

[bassGtar]

Don't USisans have a threshold for how much non-taxable profit they can have outside of their main income? We have it here, several thousand £€$... up in the North of Europe, and we're quite strict about taxation otherwise.

Nope, in the USA income is income. If you report it (or get audited) you pay tax on it. Gov’t is trying to clamp down on Ebay style sellers by making the payment flow reportable (to the IRS) by the payment facilitators, but there is no way to track profits and the IRS is chronically underfunded for carrying out enforcement via audits. IMHO the big fish get loopholes and the little fish are allowed to become criminally complicit.

 

[alex1fly]

I wouldn't worry too much about needing a jazz bass specifically for covers in a yet-to-exist band. Plenty of bassists use non-jazz basses for live cover bands. No sense in penciling yourself into a "must use this piece of gear" box in this case IMO

 

[lbbc]

You have a Fender Coronado I'm in awe can't say much more this is a run-on sentence

Thanks....I've been looking for a Coronado for years and found it on another music selling site!

 

[dbsfgyd1]

What would you recommend he do if he had to sell the bass and didn’t remember what he paid for it, or received it as a gift and didn’t know the giftor’s basis in the bass? Cash only transaction? Claim he inherited recently from some deceased he might have known? Get amnesia in April? What do most people do?

When you invest in an asset, you are required by the IRS to track your cost basis. This is nothing new. Just ignored mostly. It’s one thing if your gain is a hundred dollars or less, but say if you have a capital gain of a thousand or more, it’s worth it for the IRS to pursue. In any event, I wouldn’t advise stiffing the government.

I’m pretty sure if his Mustang was bought at retail in 1973, his cost basis would be around $300. A quick call to Fender might provide that answer.

In the event of a gift there is no investment from the recipient, so the cost basis is $0 and any sale for cash in the future is subject to capital gains tax.

With regard to an inherited instrument, the cost basis is the value assigned at probate. If the instrument was not probated and the appropriate probate tax was not paid, the cost basis is $0, and the estate (probably a relative of yours that was the executor) may come after you for the unpaid probate tax.

Cash transactions are still subject to the tax. Dealing in cash transactions without a receipt is not smart, especially if you’re doing that to defraud the government. Or, how about the deal goes south?

 

[bassGtar]

When you invest in an asset, you are required by the IRS to track your cost basis. This is nothing new. Just ignored mostly. It’s one thing if your gain is a hundred dollars or less, but say if you have a capital gain of a thousand or more, it’s worth it for the IRS to pursue. In any event, I wouldn’t advise stiffing the government.

I’m pretty sure if his Mustang was bought at retail in 1973, his cost basis would be around $300. A quick call to Fender might provide that answer.

In the event of a gift there is no investment from the recipient, so the cost basis is $0 and any sale for cash in the future is subject to capital gains tax.

With regard to an inherited instrument, the cost basis is the value assigned at probate. If the instrument was not probated and the appropriate probate tax was not paid, the cost basis is $0, and the estate (probably a relative of yours that was the executor) may come after you for the unpaid probate tax.

Cash transactions are still subject to the tax. Dealing in cash transactions without a receipt is not smart, especially if you’re doing that to defraud the government. Or, how about the deal goes south?

Our experiences are very different. I want to address two points where our opinions diverge:

Your basis in property received as a gift is the same as the donor’s, unless you subsequently sell the property for less than the fair market value (FMV) at the time of the gift, in which case your basis is said FMV. This ’unless’ prevents people from gifting capital losses to other taxpayers who have capital gains that could otherwise be reduced.

Your basis in inherited property is the FMV at the time of death. Property doesn’t need to pass through probate to get the basis step-up (or step-down). Some examples of property specifically excluded from probate are accounts with named beneficiaries and property in living wills. I also believe that different states have different requirements for probate. And executors don’t have liability for the tax cheating of beneficiaries, and wouldn’t even know it had occurred.

These are my informed, though possibly not completely up-to-date opinion. Please consult a qualified tax professional before committing to any tax evasion strategies (tax avoidance = legal, tax evasion = illegal)

 

[GIBrat51]

Keep 2 unless you are severely strapped for liquid. I voted carrots.

RATZ!! Beat me to it...

 

[jtwill1227]

I voted for sell the mustang, since I am in the market for a mustang, and might live local to you (Delaware)

 

[Ken R]

Yeah, yeah, yeah. Whatever.
Show me the Fernandes!

 

[dbsfgyd1]

Our experiences are very different. I want to address two points where our opinions diverge:

Your basis in property received as a gift is the same as the donor’s, unless you subsequently sell the property for less than the fair market value (FMV) at the time of the gift, in which case your basis is said FMV. This ’unless’ prevents people from gifting capital losses to other taxpayers who have capital gains that could otherwise be reduced.

Your basis in inherited property is the FMV at the time of death. Property doesn’t need to pass through probate to get the basis step-up (or step-down). Some examples of property specifically excluded from probate are accounts with named beneficiaries and property in living wills. I also believe that different states have different requirements for probate. And executors don’t have liability for the tax cheating of beneficiaries, and wouldn’t even know it had occurred.

These are my informed, though possibly not completely up-to-date opinion. Please consult a qualified tax professional before committing to any tax evasion strategies (tax avoidance = legal, tax evasion = illegal)

 

[skycruiser]

Please consult a qualified tax professional before committing to any tax evasion strategies (tax avoidance = legal, tax evasion = illegal)

Good advice. Plan your tax fraud behind closed doors with a professional, not on a public forum.

 

[dbsfgyd1]

Our experiences are very different. I want to address two points where our opinions diverge:

Your basis in property received as a gift is the same as the donor’s, unless you subsequently sell the property for less than the fair market value (FMV) at the time of the gift, in which case your basis is said FMV. This ’unless’ prevents people from gifting capital losses to other taxpayers who have capital gains that could otherwise be reduced.

Your basis in inherited property is the FMV at the time of death. Property doesn’t need to pass through probate to get the basis step-up (or step-down). Some examples of property specifically excluded from probate are accounts with named beneficiaries and property in living wills. I also believe that different states have different requirements for probate. And executors don’t have liability for the tax cheating of beneficiaries, and wouldn’t even know it had occurred.

These are my informed, though possibly not completely up-to-date opinion. Please consult a qualified tax professional before co, mmitting to any tax evasion strategies (tax avoidance = legal, tax evasion = illegal)

Good post, and thanks for the correct information on probate.

I'm not so sure I understand how you can gift a capital loss. The way I understand it if I bequeath 100 shares of XYZ, that I bought at $50 a share, and grew to $100 a share at the time of my death. The beneficiary's cost basis is $100 a share regardless of what happens after that. Going further, either capital gain or loss, is based on the $100 per share price at the time of my death.

Are you saying that I have a fatal heart attack over XYZ cratering in a free fall, and on my deathbed I bequeath my share that my beneficiary, they can not use further losses to offset other personal gains? Did I get that right?

 

[bassGtar]

Good post, and thanks for the correct information on probate.

I'm not so sure I understand how you can gift a capital loss. The way I understand it if I bequeath 100 shares of XYZ, that I bought at $50 a share, and grew to $100 a share at the time of my death. The beneficiary's cost basis is $100 a share regardless of what happens after that. Going further, either capital gain or loss, is based on the $100 per share price at the time of my death.

Are you saying that I have a fatal heart attack over XYZ cratering in a free fall, and on my deathbed I bequeath my share that my beneficiary, they can not use further losses to offset other personal gains? Did I get that right?

The gift rules relate to a normal gift, not a transfer at death (through will). So if I bought some shares of Peloton for $30k and right now they are only worth $5k. I could sell them and have a $25k loss, only $3k of which would be deductible on my return (net capital loss is limited to $3k per year). Or I could be clever and gift them to my brother, who has a $40k capital gain from some Apple stock he sold this year. He could sell them and use the $25k loss to reduce his capital gain from $40k down to $15k. Except that the Gov’t says NO!, because he is selling the shares for a loss, my brother’s basis in the Peloton shares is the FMV of the Peloton shares at the date of the gift ($5k), thus eliminating the loss that I tried to gift to him.

If after talking to my tax advisor, who put a stop to my plans, I died from the anguish of my Peloton holdings, and the shares passed to my brother via my will, his basis would be $5k (FMV at date of my death).

Hope this makes sense.

 

[dbsfgyd1]

Hey, thanks much for your posts. Really appreciated the info, and enjoyed them much. Have a good one.