If it is inventory held in a trade or business, it is not a capital asset. Otherwise, "... Generally, property held for personal use is a capital asset. Gain from a sale or exchange of that property is a capital gain. Loss from the sale or exchange of that property is not deductible. You can deduct a loss relating to personal-use property only if it results from a casualty or theft. "
Property held for investment is also a capital asset and gain or loss from the sale is includible in income. The burden on the taxpayer is to prove that the property was actually held for investment.
Interestingly, guns are not included by the IRS on the list of "collectibles" such as art that are subject to higher capital gains rate.
So, if you are actually carrying on a trade or business the proceeds from gun sales are sales revenue and like any business you can deduct the cost of sales as well as deduct expenses necessary for the business, subject to the hobby loss regulations.
If you are not in the business, gain on sales (proceeds minus provable cost basis) is taxable. However, "collection expenses" may be deducted to the extent of gross revenue even if the activity does not qualify as a trade business or investment activity, subject to the rules for calculating the gross revenue and deduction limitations. Losses on sales are not allowed as capital losses.
This summarizes the rules and regs as I understand them altho I have never practiced tax accounting and could have missed something. The above information is worth at least what you paid for it. There is a good detailed discussion of the regulations, court cases etc. regarding collectors at
http://www.pli.edu/product_files/EN0...6693/89177.pdf
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