Eric Shaw sold his baseball card collection at a recent trade show for $10,000. He purchased the collection for a total cost of $4,000 several years ago. Assuming Eric is in the 25% ordinary income tax bracket, what is the amount of tax due on the sale?
The capital gain associated with the sale of the baseball cards is $6,000 ($10,000 amount realized less
$4,000 basis). The gain would be considered a long-term gain because the collection was purchased several years before the sale.
Normally, long-term gain on the sale of collectibles is taxed at 28%. However, the 28% rate represents a MAXIMUM rate, meaning that if the taxpayer's ordinary rate is lower, the gain would be taxed at the
Eric Shaw is in the 25% ordinary income tax bracket, and therefore his $6,000 gain would be taxed at 25%, resulting in a tax due of $1,500.
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