My father, who died in 1982, gave us, his three children, his antique watch collection years before he died. Recently(this year), we sold the collection at auction and my share realized was $32,000. Do I owe taxes on the sale?

ANSWER

The BIDaWIZ Team's Answer:

Since the antique watches were given to you prior to your father's death, title 26 & section 1015 of the Internal Revenue Code will dictate the tax treatment. The section states that the cost basis of the property will be the same as if it was still held by your father. This means that if your father originally paid $5,000 for the watch collection, that would be the cost basis and your gain would be the sale price minus the cost basis of your share. That amount would be taxable. There's one exception to the rule. If the fair market value of the watch at the time of the gift is less the cost basis, then it's possible that you may be able to report a loss or smaller capital gain. It depends on the cost basis, fair market value at the time of the gift, and the sale price. Please let us know if this is the case. We don't anticipate this being the case since antique watches typically appreciate over time. Please note that there are special capital gain taxes for collectibles. Specifically, if your above the 15% tax bracket, then you'll owe 28% in capital gains taxes for the collectible.