Are we taxed on this?

[jemh]

You get a Rolex for your graduation as a gift and it's currently worth quite a bit of money. You sell it, do you have pay tax on that sale in the US?

[Etschell]

Originally Posted by jemh

You get a Rolex for your graduation as a gift and it's currently worth quite a bit of money. You sell it, do you have pay tax on that sale in the US?

i believe you get a step up in basis to the value of the gift. so presumably no. at least for federal purposes. not sure on state purposes.

if your parents gift it to you, you keep it and its worth less than 28,001 at the time of the gift no one pays tax.

even if its above 28k they can use their lifetime exemption up to 11 million.

check with a tax professional though. this isnt tax advice.

[DantonIzzo]

No.

[SoCal_Batman]

Nope.

[kalo925]

Originally Posted by jemh

You get a Rolex for your graduation as a gift and it's currently worth quite a bit of money. You sell it, do you have pay tax on that sale in the US?

This question is a good example of why watches are "assets". In another thread recently many people said they wouldn't consider the their watch as an asset in estimating their net worth.

You would/should pay income tax on the positive difference between the sale price and the basis of that asset. If the watch was given to you new then the previous owner's basis would be the price paid. You could also use that as your basis. If it's a precious metal watch or a watch that loses value immediately after purchase you might be able to establish your basis at the fair market value when the watch was given to you. Which one might argue is less that purchase price. If you are given a watch in which the previous owner had a lower basis than the value when given to you, it's more complicated.

Do people usually pay taxes on a positive price difference on these sales? I doubt it.. But I suppose if one was ever audited and they found a $20,000 cash deposit in to your bank account. They might ask where that money came from.. Statistically a low possibility I would think.

If you sell the watch for what the gift giver paid, this is also your basis, no you would not need to pay taxes. If the gift giver bought you a new white face ceramic Daytona and you sell it for $6000 more than he paid, according to the code I'm pretty sure the $6000 is taxable to you.

Consult a tax person for a definitive answer, but this is the way I think the tax code is.

[EdwardC]

No selling a gift shouldn’t be taxed

[kalo925]

Originally Posted by Etschell

i believe you get a step up in basis to the value of the gift.

I'm pretty sure this is only for how to establish a basis for an inheritance. A capital asset as a gift is different.

[Paul_I]

Assuming this is the Daytona 6263, are you going to post some photos?

[Investr]

Ok, we are CPAs now....

[Etschell]

Originally Posted by kalo925

I'm pretty sure this is only for how to establish a basis for an inheritance. A capital asset as a gift is different.

youre right. its the donors adjusted basis. the issue becomes if the watch has been in the family for years basis could be very low.

basis determination is a bit complex.

[kalo925]

Originally Posted by kalo925

You would/should pay income tax on the positive difference between the sale price and the basis of that asset. If the watch was given to you new then the previous owner's basis would be the price paid. You could also use that as your basis. If it's a precious metal watch or a watch that loses value immediately after purchase you might be able to establish your basis at the fair market value when the watch was given to you. Which one might argue is less that purchase price. If you are given a watch in which the previous owner had a lower basis than the value when given to you, it's more complicated.

Also, the basis of the watch could be much lower if say your grandfather gave you a Paul Newman 6263 that he bought for $2000. That I believe would also be your basis and if you sold it there would be a significant income tax to you.

[Fabrice M]

yes. you do

[kicksncrowns]

No need to worry

[kalo925]

Deleted

[MinMay]

IRS is your best friend :)

[breitlings]

Originally Posted by Etschell

i believe you get a step up in basis to the value of the gift. so presumably no. at least for federal purposes. not sure on state purposes.

if your parents gift it to you, you keep it and its worth less than 28,001 at the time of the gift no one pays tax.

even if its above 28k they can use their lifetime exemption up to 11 million.

check with a tax professional though. this isnt tax advice.

Isn't 10 mil just for death tax exemption?

AFAIK if it is under 15k then no (that is under the limit for gifts from an individual to be received tax free (in a given tax year)). I am also not an attorney and this isn't tax advice.

[breitlings]

Originally Posted by Investr

Ok, we are CPAs now....

lol wouldn't this be more of an estate planning, tax law, perhaps even a trust law question for an attorney?

[MILGAUSS88]

Sales tax, no unless you are in New York.
Income tax, no if under $10,000.
My understanding, yes if over $10,000

[breitlings]

Originally Posted by kalo925

a significant income tax to you.

if it is over 15k wouldn't it be treated and taxed as Capital Gains and not earned income (which is a lot higher)?

[kalo925]

Originally Posted by breitlings

if it is over 15k wouldn't it be treated and taxed as Capital Gains and not earned income (which is a lot higher)?

Sure, it's a capital asset and a capital gain. A capital gain is income. I'm not sure where $10k and $15k numbers are coming from I don't remember reading about them. Maybe you are thinking of the 15% rate for capital gains? I know the rules have changed recently for capital gains.

[kalo925]

Originally Posted by Etschell

youre right. its the donors adjusted basis. the issue becomes if the watch has been in the family for years basis could be very low.

basis determination is a bit complex.

[breitlings]

Originally Posted by kalo925

Sure, it's a capital asset and a capital gain. I'm not sure where $10k and $15k numbers are coming from I don't remember reading about them. Maybe you are thinking of the 15% rate for capital gains? I know the rules have changed recently for capital gains.

I believe you are allowed to get 15k tax free gift from an individual per year. that is where that number comes from.

[KeepTicking]

Oh my, there is a lot of misinformation in this thread... he’s asking about tax on the sale, not on receipt of the gift, a watch is a capital asset (IRC Section 1221 property), the sale of a watch at a gain (as others have said, depends on basis which should be what the gift giver paid) is a capital gain, it is taxable regardless if the gain is $1 or $1M. Now the real question is whether most people report that gain...

[Bartlette]

I'm not a cpa or a tax lawyer, but i do know that ANY gain in dollar amount when you sell an asset is generally a taxable event to America's all powerful taxing authorities. Federal. State. Etc.

[breitlings]

...

[Bgator]

Originally Posted by Investr

Ok, we are CPAs now....

No, but I am a tax attorney.

There is a lot of incorrect information in this thread. Some people have gotten close but no one is completely correct.

If this is your situation, please discuss with your CPA.

[c41006]

Originally Posted by KeepTicking

Now the real question is whether most people report that gain...

I don’t think anybody does.

[kalo925]

Originally Posted by breitlings

I believe you are allowed to get 15k tax free gift from an individual per year. that is where that number comes from.

Yes. My mind was stuck from years ago when the number was lower. Cash up to $15k is no tax implication for either side. Real property gifts seem to be another story. Fair value value is supposed to be established. If higher than $15k reported to the IRS. Gift givers basis is transferred to recipient and capital gains paid if sold.

Complicated for the OP it seems if the watch is real and if he wants to follow the tax law.. or not.. what to do...

[kalo925]

Originally Posted by Bgator

No, but I am a tax attorney.

There is a lot of incorrect information in this thread. Some people have gotten close but no one is completely correct.

If this is your situation, please discuss with your CPA.

[kalo925]

Originally Posted by c41006

I don’t think anybody does.

I wonder. Cash probably not.. Deposit a check from an auction house? I'm sure most wise people would report a gain.