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selling gold ornaments for cash

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devantra

New member
What is the name of your state? Florida

I am married and I have been filing tax returns jointly with my husband since our marriage. I am planning to sell my gold ornaments for $32,000 cash. Can I simply give that ornament and get the cash or whether any formalities/procedures I should follow? Will that money be counted as income or will it be counted as profit? Will it be counted as my income (or profit), or my husband’s income (or profit), or joint income (or profit)? How to report it in taxes?
 


LdiJ

Senior Member
What is the name of your state? Florida

I am married and I have been filing tax returns jointly with my husband since our marriage. I am planning to sell my gold ornaments for $32,000 cash. Can I simply give that ornament and get the cash or whether any formalities/procedures I should follow? Will that money be counted as income or will it be counted as profit? Will it be counted as my income (or profit), or my husband’s income (or profit), or joint income (or profit)? How to report it in taxes?
What do you mean by "gold ornaments"? The rules are a bit different when selling art and collectables. I need a better idea of what it is that you are selling.
 

Taxing Matters

Overtaxed Member
Florida law, like the law of almost every other state, requires that contracts for the sales of goods exceeding $500 must be in writing in order for the contract to be enforceable, with a notable exception for contracts that have been fully performed. Even if that were not the case, it is still good practice to get the deal in writing for several reasons. One is that in the case of a later dispute the written contract makes it clear what the terms of the deal were so that you don't have rely on what may be competing claims about what the deal was.

Second, it's a good idea to have it for tax purposes. You want to be able to show the source of the $32,000 that you get from the sale. Without documentation for that the IRS may simply assume it is all ordinary income, which would cost you more in tax. Your transaction results in a capital gain in the amount of the difference between the $32,000 you get from the sale and your basis in the stuff you sell. If you bought the items then your basis is the price you paid for them. Hopefully you have receipts to prove that basis. Since you held the stuff for more than a year whatever the gain is would be taxed as long term collectibles gain at a maximum rate of 28%, as opposed to the maximum rate of 39.6% that applies to ordinary income. So you want to have documentation to show that the $32,000 was from the sale of the gold ornaments to get the benefit of only being taxed on the gain instead of the entire $32,000 and to get the benefit of the lower long term capital gains rates.
 

devantra

New member
Thanks for all your responses. It is a gold necklace which I bought in another country, while visiting there, for $35,000, prior to my marriage. I used it for all these years. I tried to sell it in shops but they are offering less. Some people, who are my friend’s friends, offered to buy it using currency for $32,000.
 

Taxing Matters

Overtaxed Member
Thanks for all your responses. It is a gold necklace which I bought in another country, while visiting there, for $35,000, prior to my marriage. I used it for all these years. I tried to sell it in shops but they are offering less. Some people, who are my friend’s friends, offered to buy it using currency for $32,000.
Then under those facts you'd end up with a long-term capital loss of $3,000. That loss can be used to offset other gains you have or, if you don't have any gains to offset, you may use the loss to reduce your other regular income. Only up to $3,000 of a capital loss may be used to offset regular income, but that limit would affect you unless you had other losses in addition to this.
 

devantra

New member
Thanks for all again your responses. I have receipt of purchase from India where I bought it. I asked the shop owner who sold me that necklace to write the amount in dollars also (it is in Indian Rupees), hoping that it may be useful/needed one day. I bought it in 2009 when I visited that country to see Tajmahal and other places. Can I use that receipt for the purchase price or any other proof is needed?

The buyers (my friend’s friends ) simply want to give me currency and prefer not to have any receipt or proof. Will it create any problem to me later on to show that this money is from the sale of necklace if IRS comes after me? If so, do I need to get a receipt from buyers or what kind of proof I should produce to prove the sale?
 

adjusterjack

Senior Member
Thanks for all again your responses. I have receipt of purchase from India where I bought it. I asked the shop owner who sold me that necklace to write the amount in dollars also (it is in Indian Rupees), hoping that it may be useful/needed one day. I bought it in 2009 when I visited that country to see Tajmahal and other places. Can I use that receipt for the purchase price or any other proof is needed?
Yes, that was a smart move on your part.

The buyers (my friend’s friends ) simply want to give me currency and prefer not to have any receipt or proof.
Well, that's suspicious.


Will it create any problem to me later on to show that this money is from the sale of necklace if IRS comes after me? If so, do I need to get a receipt from buyers or what kind of proof I should produce to prove the sale?
You'll need some sort of documentation or you might get the deduction disallowed if you get audited. Worse, you might get taxed on the full amount.

Here's an idea. Write up a bill of sale, identifying the parties, the items and the price, sign it and date it for the date of the transaction, make two copies, keep them separate in your pockets. Have a friend with you. After you have been handed the money and turned over the ornaments, take out one copy and hand it to your friends and ask them to sign it. If they refuse to sign it, just leave with the money and have your friend write on your copy that they witnessed the transaction. Yes, it's sneaky, but you really should have documentation of the transaction.
 

Taxing Matters

Overtaxed Member
Can the loss be deducted at all? This is personal property, not an investment.
While you generally cannot deduct losses on personal use property, one might argue that a significant piece of gold jewelry was bought not only to wear, but also for investment. People do speculate in gold and silver after all, and not just gold and silver bars.
 

davew9128

Junior Member
While you generally cannot deduct losses on personal use property, one might argue that a significant piece of gold jewelry was bought not only to wear, but also for investment. People do speculate in gold and silver after all, and not just gold and silver bars.
Mr. T likes this.
 

devantra

New member
Thanks again for all your responses. So, selling receipt is vital, I will get it.
I bought gold coins in the USA few years ago and I have receipt for that also. If I want to sell it, the procedure, in terms of tax/profit/loss, is the same for selling that necklace?
 

FlyingRon

Senior Member
Note that while the calculation of the amount of gain is the same, if these are bullion coins (i.e., things that have a specific weight of gold in them, rather than being currency), then there's a different capital gains tax rate that you must pay.
 

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