capital gains /income tax on sale of NFA item?

[mac1911]

I have not seen any mention of this but if you sell a transferable MG do you get hit with any income or capital gains tax?

 

[BriMac]

It would not be any different than any other collectable in the eyes of the IRS.

 

[mac1911]

It would not be any different than any other collectable in the eyes of the IRS.

I see just never thought of it until seller said he backing out because he didnt want to pay any taxes?
so its of your best interest to record any expense in maintaining that collectable as a deduction.

 

[MaynardDad]

its of your best interest to record any expense in maintaining that collectable as a deduction.

Hmm … how much test firing can be considered necessary maintenance?

 

[BriMac]

Yup ,it would suck to pay on a 475.00 HK sear that you had for some years.

 

[Len-2A Training]

I see just never thought of it until seller said he backing out because he didnt want to pay any taxes?
so its of your best interest to record any expense in maintaining that collectable as a deduction.

Sorry but the IRS won't buy that. Here's how their rules work (and I'm 100% serious):

- Unless the item is part of a business (as IRS would define it, something where you put time and money and strive to make a profit), deductions aren't allowed. It's considered by IRS to be a "Hobby", where losses aren't permitted wrt tax returns.
- Let's say that you purchased .22LR bulk for $15/brick before the run-up. You now sell it for $25. As far as IRS (and DOR) are concerned, you supposed to declare the capital gain (and pay taxes on) $10!!
- Let's say that you bought the same ammo for $65/brick during the run-up and no unload it for $25. Sorry, no deduction unless you are running a firearms/ammo dealer business.

See how fair it is?? If you do, please explain it to me!!!

 

[icyclefar]

Sorry but the IRS won't buy that. Here's how their rules work (and I'm 100% serious):

- Unless the item is part of a business (as IRS would define it, something where you put time and money and strive to make a profit), deductions aren't allowed. It's considered by IRS to be a "Hobby", where losses aren't permitted wrt tax returns.
- Let's say that you purchased .22LR bulk for $15/brick before the run-up. You now sell it for $25. As far as IRS (and DOR) are concerned, you supposed to declare the capital gain (and pay taxes on) $10!!
- Let's say that you bought the same ammo for $65/brick during the run-up and no unload it for $25. Sorry, no deduction unless you are running a firearms/ammo dealer business.

See how fair it is?? If you do, please explain it to me!!!

While deductions are not allowed, accessories purchased, and improvements made can be added to your basis for tax purposes.

Might be beneficial as it relates to NFA items, less so in the example of ammo.

 

[Len-2A Training]

While deductions are not allowed, accessories purchased, and improvements made can be added to your basis for tax purposes.

Might be beneficial as it relates to NFA items, less so in the example of ammo.

Agreed. I used an extreme example just to prove the point that it is a one-sided system. I seriously doubt that anyone declares their "winnings" from re-selling privately owned ammo or winning $10 on a $1 lottery ticket.

 

[jar]

Agreed. I used an extreme example just to prove the point that it is a one-sided system. I seriously doubt that anyone declares their "winnings" from re-selling privately owned ammo or winning $10 on a $1 lottery ticket.

I saw an article recently on people that buy up losing lotto tickets and sell them to lottery winners to fraudulently use to offset lotto winnings. (You can deduct gambling losses up to the amount of gambling winnings.)

 

[Fattman]

Yes this was something I remember growing up. My friends mom would take us to the dog track and we got a dollar for every handful of loser scratch tiks we "turned in". Lol

Sent from my XT1080 using Tapatalk

 

[dcmdon]

Sorry but the IRS won't buy that. Here's how their rules work (and I'm 100% serious):

- Unless the item is part of a business (as IRS would define it, something where you put time and money and strive to make a profit), deductions aren't allowed. It's considered by IRS to be a "Hobby", where losses aren't permitted wrt tax returns.
- Let's say that you purchased .22LR bulk for $15/brick before the run-up. You now sell it for $25. As far as IRS (and DOR) are concerned, you supposed to declare the capital gain (and pay taxes on) $10!!
- Let's say that you bought the same ammo for $65/brick during the run-up and no unload it for $25. Sorry, no deduction unless you are running a firearms/ammo dealer business.

See how fair it is?? If you do, please explain it to me!!!

You are correct, to a degree. I checked with my CPA father on this one. While you can't deduct costs associated with keeping it. You can add any expenses directly related to the actual item to the cost basis for the item.

So if you bought a firearm for $500. But then spent $300 on an upgraded bbl and $200 on a Geissele trigger, your cost basis for the firearm is now$1000 for the purposes of computing capital gains, not $500.

One other thing. Improvements increase your cost basis. Maintenance does not. So if you upgraded a barrel, it figures into the cost basis. If you replaced a worn out barrel, it does not.

Don

 

[Beansie]

I would imagine this would fall under the collectables gains rates as well, so Ordinary Income for short term (held the item for less than a year) and statutory 28% tax on long term.

So basically, you're looking at losing 28% of your profit from the sale here.