SElling silver bars

[tranquility]

It's like I buy a bunch of grapes and turn it in to wine. Wine is a collectible. Grapes are not.

Not a great example as turning the grapes into wine is a business.

 

[davew128]

Xray films are not bullion or coins (or any other metal meeting the definition of collectible). Once it's refined, yes.

It's like I buy a bunch of grapes and turn it in to wine. Wine is a collectible. Grapes are not.

Ron, you're kind of (ok completely) missing the point. The IRC defines "precious metals" as a collectible. Period. You can look it up. IRC 1 defines collectibles tax rates and refers you to 408 for the definition of collectibles. Its pretty black and white. 408(m)(2)(C) "any metal or gem".

The OP has silver bars not xray films. That the silver was procured from xray films is 100% irrelevant to the fact that they are NOW silver bars. I don't see anything to indicate OP is in the trade or business of extracting and selling silver. Even if the OP was constantly extracting silver, it sounds like it was to make bars and hold for investment which would still make it a capital asset and therefore gain would be taxed as a collectible.

Your grape to wine analogy is off point because the OP is not selling xray films.

 

[Zigner]

I'm curious as to the actual ownership of the silver...did the OP OWN the x-ray films, or was s/he just an enterprising x-ray tech?

 

[Seanscott]

You are in a financial bind I imagine you're in a low tax bracket. I doubt if Uncle Sam will come after you for your little silver scheme - IF he ever uncovers it.
I'd sell the silver, put the money in my pocket, and I wouldn't report a darn thing!

 

[mokemom]

I'm curious as to the actual ownership of the silver...did the OP OWN the x-ray films, or was s/he just an enterprising x-ray tech?

The silver was extracted from xray machines that we were in the business of installing and maintaining. The silver was collected and ultimately melted down into bars. It was collected over many years. What kind of records would be needed to calculate captial gain?

 

[FlyingRon]

Not a great example as turning the grapes into wine is a business.

And recovering silver from film is less so?

 

[FlyingRon]

Ron, you're kind of (ok completely) missing the point.

No I'm not.

The IRC defines "precious metals" as a collectible. Period.

Yes, but it goes on to describe what "precious metals" are. Silver bromide in films and spent processor chemicals doesn't seem to fit the bill. Further, this sort of material would appear to be a NON-CAPITAL ASSET under the code.

You can look it up. IRC 1 defines collectibles tax rates and refers you to 408 for the definition of collectibles. Its pretty black and white. 408(m)(2)(C) "any metal or gem".

408 HAS NOTHING WHATSOVER TO DO WITH THE ISSUE AT HAND. Do you not understand the phrase "for the purpose of this paragraph?" It means that outside of the paragraph involved, the definition shown is WITHOUT MEANING.
This is a section on what sort of investments are legitimate for IRAs. You find this spelled out in this section because a political lobby bought off congress to make investments in precious metals legitimate for IRAs (the legislation sought to put them on the same footing as equities and other IRA-legal investments). It's a different definition specifically tailored for that section.

The OP has silver bars not xray films. That the silver was procured from xray films is 100% irrelevant to the fact that they are NOW silver bars.
I don't see anything to indicate OP is in the trade or business of extracting and selling silver. Even if the OP was constantly extracting silver, it sounds like it was to make bars and hold for investment which would still make it a capital asset and therefore gain would be taxed as a collectible.

Well this is another place where you seem to be completely wrong for failure to read all of what he said. The indication was that he obtained the films and recovered the silver from them. Yes, after they were rendered into the bars they became a capital (colleticible) asset, but the tax implications here involve the transformation from the raw materials into the silver bars.

Your grape to wine analogy is off point because the OP is not selling xray films.

Your analysis of my analogy is off because I never said he sold xray films nor does that have squat to do with it. He purchased or obtained Xray films. He extracted what became the collectible asset from that.

That's 100% analogous to purchasing grapes and yeast and processing it into wine (which is also a collectible asset).

 

[Zigner]

The silver was extracted from xray machines that we were in the business of installing and maintaining. The silver was collected and ultimately melted down into bars. It was collected over many years. What kind of records would be needed to calculate captial gain?

Frankly, I'm STILL not convinced that you obtained the silver legally. You installed and maintained the machines. You didn't OWN the machines.

 

[mokemom]

Frankly, I'm STILL not convinced that you obtained the silver legally. You installed and maintained the machines. You didn't OWN the machines.

The extraction of the silver was part of the process of the maintenance. It's collected in the machine itself, and upon cleaning, it's all 'scooped' out and hauled away. Kinda like scrap. The 'owners' (usually doctors) didn't want the residual junk out of the machines. They didn't even want the old machines when they upgraded.

 

[Zigner]

The extraction of the silver was part of the process of the maintenance. It's collected in the machine itself, and upon cleaning, it's all 'scooped' out and hauled away. Kinda like scrap. The 'owners' (usually doctors) didn't want the residual junk out of the machines. They didn't even want the old machines when they upgraded.

Gotcha .

 

[Some Random Guy]

See
Publication 544 (2009), Sales and Other Dispositions of Assets

You should look at also Schedule D (capital gains). Read the instructions for line 18 and the 28% collectible rate

http://www.irs.gov/pub/irs-pdf/f1040sd.pdf
http://www.irs.gov/pub/irs-pdf/i1040sd.pdf

Based on what you have said so far, the items would have a $0 cost basis since the costs of extracting the silver were already accounted for in the business.

you mentioned that "we" were in the business of cleaing the machines. How did YOU acquire the silver from the business? Is it a sole proprietorship?

 

[mokemom]

you mentioned that "we" were in the business of cleaing the machines. How did YOU acquire the silver from the business? Is it a sole proprietorship?[/QUOTE]

it was a family-owned business - that has closed. i explained above how we acquired the silver.

 

[Some Random Guy]

My question about how you acquired the silver was from a financial standpoint, not a technical one. I was trying to figure out if the silver cost you any money to acquire or if you were given the silver for free from the business.

Based upon your answer it still sounds like you have no cost basis for the silver, so any money you get from selling it would be 100% taxable capital gains.

 

[tranquility]

Unless it's a business.

 

[davew128]

No I'm not.

We'll agree to disagree that you're wrong.

Yes, but it goes on to describe what "precious metals" are. Silver bromide in films and spent processor chemicals doesn't seem to fit the bill. Further, this sort of material would appear to be a NON-CAPITAL ASSET under the code.

OP is selling silver bars not silver bromide.

408 HAS NOTHING WHATSOVER TO DO WITH THE ISSUE AT HAND. Do you not understand the phrase "for the purpose of this paragraph?" It means that outside of the paragraph involved, the definition shown is WITHOUT MEANING.

Go back to IRC 1 and post back with results. Never mind. Here it is:

IRC 1(H)(5) Collectibles gain and loss
For purposes of this subsection—
(A) In general
The terms “collectibles gain” and “collectibles loss” mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408 (m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.

This is a section on what sort of investments are legitimate for IRAs. You find this spelled out in this section because a political lobby bought off congress to make investments in precious metals legitimate for IRAs (the legislation sought to put them on the same footing as equities and other IRA-legal investments). It's a different definition specifically tailored for that section.

See above.

Well this is another place where you seem to be completely wrong for failure to read all of what he said. The indication was that he obtained the films and recovered the silver from them. Yes, after they were rendered into the bars they became a capital (colleticible) asset, but the tax implications here involve the transformation from the raw materials into the silver bars.

No, the tax implication is he is selling silver bars, period.

Your analysis of my analogy is off because I never said he sold xray films nor does that have squat to do with it. He purchased or obtained Xray films. He extracted what became the collectible asset from that.

That's 100% analogous to purchasing grapes and yeast and processing it into wine (which is also a collectible asset).

Sigh. Not for the winery who sells their own wine on an ongoing basis. A winery that sells its own wine must classify the wine as inventory and cost of production would be COGS not basis in a capital asset.