sell by auction or not?

[John Talmage]

Hi all,

I am on the precipe of a major decision. I am looking to sell about 30 guns. They range from utility to some nicer guns (include 2-3 Parkers). Condition runs from non-working (utility) to excellent. So, would you sell by auction or on your own? What are the pros/cons?


My current plan, given quantity and the utility nature of many, is to sell as many as possible by auction. I will be keeping several (including 2-3 Parkers). But, maybe i keep a few more of the higher end guns than originally planned if selling by auction is questionable. My concern is setting a good price, finding buyers, etc. I have been referrred by one fo the top decoy auction people to a local auction house that will use proxibid, charge a reasonable commission. I feel comfortable with them for the guns I do send to auction.

Jake

[David Dwyer]

John
A possible third option is to take the majority of the guns to a dealer who would pay a fair price for the group. We have a good one in NC that I have seen purchase collections at a fair price. That way you unload some of the less desirable guns with the better ones. I would separate the really good guns and offer them for sale yourself, starting with here.
David

[Rick Losey]

if you attempt to auction a good gun yourself - you can always place a reserve and prevent it going to cheap

[Bill Murphy]

Proxibid is used by auction houses that charge the seller a commission, an additional buyer's premium, and a 3% fee added on for Proxibid. That separates the actual selling price from the amount the seller gets by a whopping percentage. Where are you located. Maybe a reader here could point you to a cheaper way into the auction world. There is a local gun auction near me that will sell your guns for a little over ten percent and no further fees or commissions.

[Mark Ouellette]

As a PGCA member you could try selling the side by sides here. I discussed the rules of this with webmaster John Dunkle last night.

1. Selling in this site should be double guns and other fine collectable firearms. If in question, ask John Dunkle.
2. Use of this for sale forum should be PGCA exclusive for at least for the first week or two. An example is "For sale on thie site until xxxxxx, after that I'm listing it on Gun Broker...
3. One might consider giving PGCA members a discount. A quick sale to a good person is worth at least a little.

Mark

[John Talmage]

Thanks for the info. This is all great stuff to consider. Let me add a little info...According to the auction house I would use, "understanding this fee is all-inclusive of insurances, hauling, storage, set up, advertising, as well as any labor associated with display, and fees associated with the on-line bidding portion of the progeram as well as commissions we have to pay Proxi-bid for items sold to on-line bidders.....There are NO HIDDEN FEES."

My fee structure is based on how much I would sell. I suspect I will either be 10% or 0% (if I sell enough).

[Scott Janowski]

Auctions all great but don't forget you will have to pay tax on the income as it will be reported.

[Bill Murphy]

Where do you live?

[John Talmage]

Maryland

[Bruce Day]

Auctions all great but don't forget you will have to pay tax on the income as it will be reported.

I am not a tax accountant or atty but:

1. I am informed that auction proceeds are not reported to the IRS

2. I have been informed by tax accountants that occasional hobby sales do not result in taxable income.

[Robin Lewis]

Another option is to give the best ones to a good retail store on consignment. It may take longer to find a buyer but you may get a better return?

[Bill Murphy]

John, PM me and I will tell you whom I recommend that is the house that I mentioned in my post. He is only a few miles from Maryland. I am in Maryland also.

[Bill Murphy]

Here I go thanking Bruce again. Tax on gun sales is BS.


Edited for a four letter word.
Mark

[George M. Purtill]

Those are extermely good questions:
1)Do auction houses file 1099s?
2) Is the income on a gain from selling a Objet d'art taxable?

I am sure one of our members can answer question #1.
I will ask my favorite tax lawyer on question #2.

[David Dwyer]

I sent an email to my CPA asking if the income on "hobby sales" is taxable.
David

[Bruce Day]

Do you deduct expenses and losses on your hobby?

[G. Wells]

Bruce - Don't think that's relevant other than the possibility of recognizing losses if you have treated your hobby as a business and then it's subject to hobby loss rules.


IRS Regulations
Personal-use property. 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.

Of course, if you don't report the gain, it's not taxable unless you are examined by the IRS.

[George M. Purtill]

Of course, if you don't report the gain, it's not taxable unless you are examined by the IRS.

Wow- I don't think I would follow that advice or course of conduct. Knowingly signing a false tax return is how they got Al Capone.

However, I do agree with your statement thats its taxable.

[G. Wells]

Wow- I don't think I would follow that advice or course of conduct. Knowingly signing a false tax return is how they got Al Capone.

However, I do agree with your statement thats its taxable.\

I agree completely with you. Just added that final comment, and it is not advice but a comment, because it seems many think not receiving a 1099 is sufficient to make gains not reportable and therefore non- taxable.

[George M. Purtill]

I'll bet there are a lot of unhappy people reading this thread at tax time.
The sad thing is that a lot of people could eliminate a lot of the liability by using a 1031 exchange.

[G. Wells]

I'll bet there are a lot of unhappy people reading this thread at tax time.
The sad thing is that a lot of people could eliminate a lot of the liability by using a 1031 exchange.
In order for personal property to qualify for a 1031 exchange - Qualified Use Personal Property

You must have held the relinquished personal property for rental, investment or use in your trade or business, and must have the intent to hold the like-kind replacement personal property for rental, investment or use in his business. Personal property not held for rental, investment or use in your trade or business is not considered to be qualified use personal property and will not qualify for 1031 Exchange treatment.

[wayne goerres]

most gun dealers consign your guns at 10% to 20% of the sale price. If they buy your gun collection outright they try to pay you at 60% of the greaded value. (hint watch the grade). Its been my experience that unless you have to sell quickly stay away from dealers. You will probable be looking at 50% of the actual value. They have to make a living to.

[George M. Purtill]

In order for personal property to qualify for a 1031 exchange - Qualified Use Personal Property

You must have held the relinquished personal property for rental, investment or use in your trade or business, and must have the intent to hold the like-kind replacement personal property for rental, investment or use in his business. Personal property not held for rental, investment or use in your trade or business is not considered to be qualified use personal property and will not qualify for 1031 Exchange treatment.

Agreed but a lot of Parker Collectors could qualify on the "investment" prong of that test.

[George M. Purtill]

We do 1031 exchanges for real estate alot and I bet I could do a set of forms for Gun sales for people who are upgrading their collections or re-investing the proceeds.

[Rich Anderson]

I would imagine there would have to be some form of a cost basis that the seller would have to prove for there to be a gain. If I sold my collection of Pre 64 M70's for $X who is to say there is a gain or not?

[G. Wells]

I think you might have it a little backwards about having to prove a cost basis to establish gain. Worst case, if you were audited by the IRS, you might have to prove basis in order for it all not to be treated as gain. See the prior post about signing false tax returns.

[Gerald Majors]

We have several gun dealers in the Lexington KY area that take guns on consignment. Tell them your price and let them have anything above that. But your price must give them room to make 20 - 30% or they will just sell their own guns and not yours.
Gerald

[Bill Murphy]

If I net $20,000 on the sale of some guns in an auction, I think I would have no trouble coming up with that much in expenses. The only question is will the IRS let me treat the sale of guns as a business after the fact.

[George Lander]

You may want to consider listing your guns here or on doublegunshop.com with what you would expect to be a fair price less a little.

Best Regards, George

[Bill Zachow]

Bill, if you reported the $20,000 sale proceeds from your collectible guns you would only be able to deduct their "cost". That cost, unless you were a federally licensed dealer (not a collector's license) would only be the provable price paid for the collectible. In order to deduct all of the normal business expenses-rent, storage, insurance, etc, etc, you must actually be in the business.

[Tom Kidd]

My accountant said that guns are specifically excluded from being treated as capital gains. Was he correct?? He also said the same as Bill did in the previous post, in that, only the 'actual' cost of the item is deductable and that the burden of proving the cost basis was on me.

[G. Wells]

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/EN00000000046693/89177.pdf