Can we be taxed???

[cntrydncr1]

Since finding my nice diamond ring I've been wondering if there is any way we can be taxed on our finds If so I'm removing any pics of that ring, and fast!

 

[Arizona Bob]

It's not just the "tax reasons" why some of us are so unlucky and never seem to "find" anything...

That's why it's a "hobby"

 

[Jeep]

If this is in regard to your Federal Tax

The appraised value of this found item is taxable.

It is a realization event under Section 61

Nice ring

Keep posting those finds

 

[Treasure_Hunter]

Here is what I know from having ran several small home based business over the years.............

It depends, legally, if your hobby profits exceeds your expenses in 3 of 5 straight years then yes you owe taxes on items sold. Now figure up every single dollar you spent on detecting, all the gas spent going hunting, vehicle expenses, parking, detectors and supplies, does it actually excede what you sold last year? For the vast majority of us the answer is no it didn't, then it isn't taxable, for most of us we spend far more then we make with the hobby when you consider all you invest.

If you lose money pursuing a hobby, you cannot deduct your hobby loss from other income, but you can deduct your expenses up to the amount of your hobby income on your tax return. A hobby loss is a miscellaneous itemized tax deduction, and as such, only the total that exceeds 2% of the adjusted gross income may be deducted.

IRS Form
FS-2007-18, April 2007
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is a business or a hobby, an activity not engaged in for profit.

In order to educate taxpayers regarding their filing obligations, this fact sheet, the eleventh in a series, explains the rules for determining if an activity qualifies as a business and what limitations apply if the activity is not a business. Incorrect deduction of hobby expenses account for a portion of the overstated adjustments, deductions, exemptions and credits that add up to $30 billion per year in unpaid taxes, according to IRS estimates.

In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

In order to make this determination, taxpayers should consider the following factors:

Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.

Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040). These deductions must be taken in the following order and only to the extent stated in each of three categories:

Deductions that a taxpayer may take for personal as well as business activities, such as home mortgage interest and taxes, may be taken in full.
Deductions that don’t result in an adjustment to basis, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
Business deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
Link:

Further information is available in IRS Publication 535, Business Expenses

 

[Jeep]

Treasure_Hunter is correct

Publication 535 is your best friend.

Section 1 deals with not for profit activity's such as Hobbies

Everyone should keep a log book and receipt of expense's incurred during the pursuit of your Hobby

 

[cntrydncr1]

well I'm not selling so I guess there is no profit! yea! thanks for the responses!

 

[BuckleBoy]

Section 1 deals with not for profit activity's such as Hobbies

Everyone should keep a log book and receipt of expense's incurred during the pursuit of your Hobby

Agreed. A log book is essential--Just in case. For some of us, the expenses far outweigh the finds.

 

[Tom_in_CA]

Don't any of you remember the sitcom episode of the "Odd Couple" show, where Felix finds a dime in a payphone booth change slot, and dutifully reports it as income on his income tax return?

You guys, this whole "publication 535" stuff, and "keeping records of expenses verses income" stuff, is only for if you intend to declare it, TO BEGIN WITH! If you are not planning on declaring the income, then you don't need off-setting deductible expense records, as there is nothing declared anyhow.

And as I understand it, you DON'T have to declare it as income, unless you liquidated it (sold on ebay, cashed in your clad to spend, etc...) anyhow.

But I'll tell you all what, just as with Felix on the Odd-Couple, I agree that we should all be keeping the metal detecting "code of ethics", which has the clause "I will obey all laws". Therefore, in the interest of the furtherance of our great hobby, I will "take the fall" for everyone here. Simply send me all your finds in the mail (you pay postage), and I will absolve you of all guilt. I will handle any tax obligations, etc.... Consider this my self-sacrificing contribution to the benefit of all forum participants here. Yes yes I know, this is mighty kind of me, but it's the least I could do.

 

[mrs.oroblanco]

Several correct answers here.

If it is not sold, it doesn't matter. Only when it is sold - or bartered - does it become taxable. However, depending on your state (and Federal, depending on how much you leave your heirs when you die), it may be taxable to them.

While keeping a ledger can be a pain - I keep a ledger on every outing we go on - while not for taxes, it does have the information I would need for taxes - but the best part is, on a day when it is 30 below zero and the ground is frozen solid, I love taking out those ledgers (officially known as my diaries ), its really fun to read about such and such a day out detecting, and what we did. Brings back fond memories, so makes it easier to keep track, just in case we need it. (along with a picture or two of important finds).

B

 

[Sandman]

Don't any of you remember the sitcom episode of the "Odd Couple" show, where Felix finds a dime in a payphone booth change slot, and dutifully reports it as income on his income tax return?

You guys, this whole "publication 535" stuff, and "keeping records of expenses verses income" stuff, is only for if you intend to declare it, TO BEGIN WITH! If you are not planning on declaring the income, then you don't need off-setting deductible expense records, as there is nothing declared anyhow.

And as I understand it, you DON'T have to declare it as income, unless you liquidated it (sold on ebay, cashed in your clad to spend, etc...) anyhow.

But I'll tell you all what, just as with Felix on the Odd-Couple, I agree that we should all be keeping the metal detecting "code of ethics", which has the clause "I will obey all laws". Therefore, in the interest of the furtherance of our great hobby, I will "take the fall" for everyone here. Simply send me all your finds in the mail (you pay postage), and I will absolve you of all guilt. I will handle any tax obligations, etc.... Consider this my self-sacrificing contribution to the benefit of all forum participants here. Yes yes I know, this is mighty kind of me, but it's the least I could do.

Tom, your a riot.........."Send me your finds." Why didn't I thunk of diss.

 

[Jeep]

Several correct answers here.

If it is not sold, it doesn't matter. Only when it is sold - or bartered - does it become taxable. However, depending on your state (and Federal, depending on how much you leave your heirs when you die), it may be taxable to them.

While keeping a ledger can be a pain - I keep a ledger on every outing we go on - while not for taxes, it does have the information I would need for taxes - but the best part is, on a day when it is 30 below zero and the ground is frozen solid, I love taking out those ledgers (officially known as my diaries ), its really fun to read about such and such a day out detecting, and what we did. Brings back fond memories, so makes it easier to keep track, just in case we need it. (along with a picture or two of important finds).

B

Actually under Federal law section 61 the appraised value is taxable because it was a found object.

Publication 535 allows you to deduct the cost of your hobby but the appraised value of the item found must be reported.

Taxes are due of the year of appraisal.

Whether or not it is sold or bartered or kept is a moot point under section 61.

This is a realization event under section 61 because it was not purchased and is found wealth and is reportable as gross income.

Just clearing up those pesky tax questions that plague us treasure hunters.

Coins are reported at face value by the way.


OIIIIIO
() ()
Jeep

 

[mrs.oroblanco]

There's a section on reporting bribes and income from crimes, too - doesn't mean too much - unless you are going to report that you found someone's lost ring and kept it.

Actually - Fed law 61 talks about "compensation" - whether from wages or barter, etc.

What you are really referring to is:

Found Property: If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.

Which is in "other types of income", along with lottery winnings, etc.

B

 

[Jeep]

Sec 61 deals with Gross income

A found ring that is appraised at 10,000.00 is an ascension to wealth or a realization event. I would advise my clients to file that way if they were not engaged in metal detecting as a hobby.

The ring in question could theoretically be listed as a treasure trove find but could also result in the seizure depending on state law. I don't really want to list the many cases on this.

Listing it as a profit under 535 as your hobby would be the way to go as it was found in pursuit of his hobby and he can also claim the deductions that accompany that hobby.

Not disagreeing with you as there are actually about 5 ways to report this, The question for me would be what would serve the best needs of the client without sending us both to the hoosegow.

The main thing is that when you post it you should be prepared to report it being the law abiding bunch that we are.

 

[Woodland Detectors]

Well.....

If you NEVER find ANYTHING you don't have this problem..

I don't ever seem to REMEMBER where ANYTHING I have came from...

Everything I FIND with my detectors I put back in the ground..

It's a "catch and release thing"

Ha! Or to the museum eh?

 

[Jeep]

Well.....

If you NEVER find ANYTHING you don't have this problem..

I don't ever seem to REMEMBER where ANYTHING I have came from...

Everything I FIND with my detectors I put back in the ground..

It's a "catch and release thing"

I agree completely

 

[47thelement]

I usually find things like office furniture, and that usually has a deprecitive value. But boy does it make the headphones sing

 

[Treasure_Hunter]

The expenses of my hobby offsets the value of anything I find ..........If Uncle Sam wants to audit me for a ring I find, I will be more then happy to have my CPA write off my 8 detectors, my computer for research, my GPS for searching, gas and wear & tear on my vehicle, my clothes, my shoes, my wetsuits, food eaten while traveling to and from as a business expenses..............

 

[rjw4law]

bottom line, is that you would have to approach the fame of Mel Fisher to get taxed....Remember these are people on the government dole (IRS employees). You just are not going to find someone ambitious enough to investigate and prove your finds...just wouldn't be worth it.

 

[Jeep]

bottom line, is that you would have to approach the fame of Mel Fisher to get taxed....Remember these are people on the government dole (IRS employees). You just are not going to find someone ambitious enough to investigate and prove your finds...just wouldn't be worth it.

So I suppose this will be a bad tax year for Santa fe new mexico now that he has found the LDM ?

 

[ivan salis]

remember this important thing -- the grubbermint only knows what yer fool enough to tell em about (so never vollunteer any info) --- even f others "blab" on you ---remember it was you told them about yer find or took them with you when the "find" was made --so in a manner of speaking you "told" on yer self --- via "bad freinds" / poor judgement .

what they don't know can' t hurt you -- so keep it that way --- remember * you have the right to be silent (many just don't have the "ability" to. )