The tangled web of auction sales

Practical and Practice issues for Professionals who practice in the area of taxation. Moral, social and economic issues relating to taxes, including international issues, the U.S. Internal Revenue Code, state tax issues, etc. Not for "tax protestor" issues, which should be posted in the "tax protestor" forum above. The advice or opinion given herein should not be relied on for any purpose whatsoever. Also examines cookie-cutter deals that have no economic substance but exist only to generate losses, as marketed by everybody from solo practitioner tax lawyers to the major accounting firms.
Judge Roy Bean
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The tangled web of auction sales

Postby Judge Roy Bean » Sat Jun 04, 2016 11:05 pm

Family member "A" acquired a fairly-rare set of volumes for their collection of books many years ago. "A" recently passed away with the estate going to the only surviving child. Surviving child got little in terms of cash or real property as "A" was in an extended-care facility and burned up most of the liquid assets.

The only surviving child has now discovered almost by accident that the book collection may be a possible gold mine. They have received a high five-figure offer from a private party for the collection.

Question to the tax experts here - when does the valuation take place for the estate? Can they not include them in the estate, simply put the items away in storage and not report an appraised value?

What happens some years down the road when they decide to sell off the valuable pieces?

Thanks in advance.
The Honorable Judge Roy Bean
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LaVidaRoja
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Re: The tangled web of auction sales

Postby LaVidaRoja » Sun Jun 05, 2016 2:02 am

Estate is valued as of the date of death. Remember, Estate tax only becomes a factor if the taxable estate is greater than $5 million. The book collection should be currently appraised. The assets AUTOMATICALLY become long-term capital gain in the hands of the heir. If the collection is valued at $1 million today, and the heir holds them for any length of time, the $1 million is the basis. If sold today for $1 million, no gain or loss. If sold in 6 months for $1.5 million, $500K capital gain.
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