Search This Site

Monday, August 18, 2014

Comic Investing 101! The Particulars!

I'm going to cover some pretty important particulars concerning comic investing that most people either don't know about doing or don't care to do. The latter part could be costly.

Most people think that all there is to comic investing is just buying comics, preserving them as best as possible, and then hopefully selling them one day. While that is the basics of it, that's still far from the truth.



You see, you have a bunch of particulars that no one likes to think about but will eventually hit you. If you're a U.S. citizen that guy who's gonna hit you is that dude to the left. Uncle Sam just doesn't want your service, he wants your money too when you start dishing off your comics.

And since you're suppose to be making a return on your comic investments, this unfortunately counts as part of your income at the end of each year. Not quite sure how it works if you're in another country, but I'm pretty sure they also have something to dig in your pockets and nickle and dime ya as well. The capital gains tax rate for long term collectibles, considered by Uncle Sam one year or longer, is a whopping 28% in the U.S., but this depends if your income tax bracket is below 28% or not. If it is below, then you'll just pay at your income tax rate rather than a higher capital gains rate.

Furthermore, it's not just the Federal level that wants your dough, some states want to wet their beaks in your comic investment returns as well. Since I live in the great state of California, they want to screw you on both ends, State Tax Return and Sales Tax.

Yep, even most states have a percentage they want when it comes to capital gains that count towards your income for the sales of collectibles. This also depends if you're in the tax bracket to pay state income tax, and the rate is whatever percentage your state takes out in income tax.

As the Sales and Use tax law states in California, you are to report and pay tax on any items purchased for personal use whether you bought that item online from a retailer out of state or in state. This is called Use tax, and there are special taxing jurisdictions that apply to certain districts that can raise the standard California Sales and Use tax of 7.50% to something even higher. Most people don't know about it or just don't report and pay it. If you're buying online, you are already on the radar and there's records of your transactions.

Furthermore, if you sell consistently online/offline or hold more than 3 garage sales per year, you are legally bound by California law to collect sales tax if you sell to other California residents often. This means you may need to get a California sellers permit if you're selling comics to others in the state often. Best to ask your accountant about those laws.

However, if you sell in high volume and consign your comics to mycomicshop, ComicLink, or ComicConnect or any other online comic book market place out of state, you don't need to worry about collecting sales tax if you opt to physically send the item to those companies and have them sell it for you.

Here in the U.S., you can count comics, antiques, or collectibles as an investment. Turbo Tax asks you if you sold any investments or comics within the tax year. So here's where I'm gonna lay some other things you should be doing when it comes to comic investing.

The first is to get one of these file boxes and folders. You can pick them up pretty much at any Office Max, Walmart, Staples, Target, etc. Pretty simple. 

Now, what goes in it? You're going to have a list of all your comic investments. I don't care whether you did this on Word, Exell, Notepad, or by hand. This list is going to detail every comic investment in your vault. You'll have the comic title, issue number, volume, what price you bought it for and the date of purchase (very important and you'll learn why soon) or at what price you sold it for if you did. The more detailed the better and that list may take up one or two folders.

The other files are going to have any and all receipts you incurred for the year that have to do with your comic investing purchases, and every different folder will hold the receipts for each different year. This means receipts for the comics you purchased also, but here's where things get tricky. 

If you're buying at comic cons mostly, most transactions are cash only. Sorry, no receipt. Even if you buy most comics at your local comic shop, the receipts are not itemized, meaning they don't look like this: Iron Man #1 - $400. They just usually have the name of the comic shop, what you paid, any change if given, and sales tax if you live in a state that has it.

So there's really no way to prove how much you bought a certain comic for at these outlets. That may be a problem when you get audited. Still, it's best you file away the receipts when you buy from a local comic shop regardless. As for comic conventions, there will be no way for an auditor to determine your correct capital gains without proof of what you bought the investment for. 

However, this is where your list comes in handy, and having the date of purchase. If you have no receipt, then the determined cost of purchase will be the fair market price of that comic during the year purchased. Another good reason to own Overstreet Price Guide.

The majority of what goes into the other folders marked year by year will be the eBay auction pages and Pay Pal receipts or any receipts from an online retailer of comics. Fortunately, they do itemize what you buy. You are going to print out the auction pages for eBay, as well as the Pay Pal transaction at their sites, and put them in the folder that marks the year you bought it.

When you sell your investment comics on eBay, you're going to do the same for your auctions: Print out the auction pages after each comic sells and the Pay Pal transactions. Now, you can get another box and folders that mark each year you've sold comic investments and file your sold auctions in them, or you can just staple the eBay and Pay Pal transaction copies of what comic you sold to the exact eBay and Pay Pal copies that details how much you bought it for, if you bought the comic on eBay.
The above is just an example of the information that's important. It's not mine nor did I buy it. With a single purchase, all you need to do is print out one page with the item title, date and winning bid. If you bought it through a Best Offer, go to Purchase History and use the page there to print out. Oh, yes, and shipping doesn't count as the total purchase cost for the investment item. Just what you bought the item for.

However, let's say you bought or sold a comic lot. If you did, you'll print out the eBay auction like above, but you also want to include the description if they do describe the issues in the lot like the below example.
This is not only to help determine your capital gains when you report them, it's also to determine the expenses you acquired when selling them. After all, if you sold a comic on eBay and use Pay Pal to receive the money, you're going to get hit up with those two fees right? You're not gonna want to include those fees as part of your profit return or capital gains so you can get taxed more, and I don't blame you. 

As for eBay fees, print out the document for all eBay fees incurred as well. Whatever you have for them to bill you, whether it's your credit card, Pay Pal, or checking account, you'll get some kind of record from them. File those as well, and I try to keep all receipts or paperwork pertaining to specific comics together if I can.

Also, any online transactions from other places such as mycomichop, ComicLink, CommicConnect or where ever, will be filed away as well. That's not it, though.

Third Party Grading receipts! You didn't forget those did you? You get receipts from CGC all the time when you submit comics to them and this counts as part of your investment, but filing these goes far beyond the usefulness of what you may think.

See, the IRS has to determine whether you're actually investing in collectibles. Believe it or not, but jewelery or gold counts as a collectible. Are you wearing your jewelery, or has it been sitting in a safe for some odd years untouched. Comics and works of art count as collectibles also.

Getting your comics slabbed is the perfect way to show that you're actually investing in comics, and not still reading them for enjoyment. After all, you can't do much with a slabbed comic, can you? If you can prove they are for either A. Business purposes or B. Investment purposes, you may be able to write some additional expenses off when it comes to determining capital gains. Just another reason why you file away CGC, PGX, CBCS or whatever receipts - for investment proof and to be able to deduct certain investment expenses after you sell.

When it comes to third party grading receipts, I just usually file them all in one folder marked "CGC". I don't have to mark the folders by year since I don't submit a lot during a year anyway. If you do, you may want to use additional folders.

Comic boxes, comic bags, comic backing boards, micro chamber paper? If you got receipts for them or eBay and Pay Pal transactions, print them out and file them as well. You just may be able to deduct those later. Like I said, best to talk to an accountant or tax specialist to see what you have or don't have to pay concerning comics as investments.

There's more to comics as investments than just buying and selling the best comics to invest in when it comes to comic investing. There are particulars, and the government fines and interest you'll pay when you don't report and pay taxes on your capital gains will wipe out any returns you may get from your entire investment comic collection. 

The big bad IRS doesn't usually catch you right away either. You're lucky if they catch you early. If they catch you not paying the proper taxes after 10 or 20 years, you can only imagine the amount of interest piled on top of each other will cost you. Talk to your accountant if you're in the 28% and above tax bracket and plan on selling your investment comics soon. If you don't plan on selling them for a long time, you can hold off on that, but I do suggest you start following the particulars outlined in this article.


11 comments:

  1. really good stuff, love this site

    ReplyDelete
  2. nice post it's good that I don't live in the US! However since the US did this Canada will be sure to follow :(

    ReplyDelete
    Replies
    1. Haha...I seriously doubt Canada will do anything like that soon, Gabriel. Must admit, I wouldn't mind moving to Canada, but I hear it isn't easy to immigrate there, much like anywhere.

      Delete
  3. I wouldn't know because I was born here but my parents say people from third world countries got priority over them

    ReplyDelete
    Replies
    1. Looks like I need to move to a third world country soon! I actually have relatives in Canada and been in the British Columbia part of the country. Was quite pleasant there.

      Delete
    2. I agree it was a nice place I lived there for three years problem was it became too expensive!

      Delete
  4. If u want a good place to live its Ottawa or Calgary.. We have a great country and is very inexpensive unless u live in Vancouver which is expensive with housing. But compare to Australia which is one of the most expensive places to live Canada is waaaay inexpensive and great place to call home.

    ReplyDelete
  5. Cool, I've never been to that part of Canada. I'll have to visit Calgary one of these days and check it out.

    ReplyDelete
  6. Def u would love Calgary Vic...The hockey the stampede and yes the beautiful rocky mountains..

    ReplyDelete
    Replies
    1. Will have to make my way up there sometime.

      Delete