Yep.
Fortunately I live in the UK so all my wines are in bond (with established transaction prices) and actually are (for the most part) not subject to CGT as they’re wasting chattel.
I’d recommend keeping a paper trail for anything you’re likely to sell/deem ‘investment’ worthy. Any and all high end wines, for example. Cellartracker + Google Drive goes a long way to solving this IMHO.
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Capital gains income, 28% rate (if longer than a year). Can’t deduct losses unless you bought for investment purposes, which in the scenario of selling the remainder of a personal cellar seems unlikely to be able to justify.
I have prepared the estate planning documents of many wine collectors. In many such documents, a collector anticipates a surviving spouse or child who is not a wine person, coming into a sizable cellar and then having to deal with selling it or otherwise. I have named a trusted friend who is wine-savvy to assist/advise my heirs in obtaining maximum proceeds, and also get a fee for that friend’s time in doing so. In many cases, wine is a significant asset of an estate and should be treated as such in one’s will or trust. Note: this is not legal advice and I am not your lawyer.
I would suggest you hire an appraiser if you think the collection is likely to fetch more than $25,000.
There are too many variables to give a good answer to your questions- and even then the answers can vary depending on which brokers are buying what at any given moment.
Within the past 90 days I did one collection that a representative of the estate had taken to an honest broker and received a solid quote. I got a second opinion and the quote was about 12% higher. It was higher because I happened to know that particular broker was on the lookout for some of the higher end wines in the collection being sold for a specific customer. Both were honest offers from good companies- it is just that one knew they had a specific buyer for a lot of the wine.
And when it comes to the unscrupulous operations- the variances can be huge. I have gotten clients up to 40% more than what some of the less ethical “full service” retailer/storage/broker etc. etc. operations have offered to unknowing ex-spouses or heirs. Wine is a big thing now and there are predators everywhere ready to take advantage.
That kind of knowledge you are not going to get for free on an internet forum. But a good appraiser can steer you in the right directions- either for a sale now, or to plan for the future.
The best way to find someone ethical is to ask reliable local retailers and wine storage facilities- and for the latter preferably not an in-house expert who buys for the wine facility to resell. There are many very ethical people out there who work for or own companies that have multiple roles in the wine biz (ie storage, retail, resale)- but it does muddy the waters a bit. Your attorney is also a good resource. Now that wine cellars are a major asset to be considered in many divorce or estate cases, it is increasingly common for legal firms to have wine appraiser contacts.
It might be worth looking into auction houses that conduct business in Delaware. The 0.0% tax rate gives buyers some wiggle room vs New York.
I should note that I’ve never sold wines at auction, and any wines that I did purchase at auction were consumed in Delaware.
you might check that. I’ve heard it’s ordinary income and not “capital gains.” I’m no tax attorney.
Source: The taxation of collectibles
I’m also not a tax attorney - just reporting what I understood to be the case and (believed) I confirmed through a search.
Its not cap gain its a collectible. I only wish we had the wasting chattel rule in the US. In theory yes you are supposed to track the purchase price of each bottle you sell, plus costs associsted with the purchase, and use as your tsx basis to compute gain.
And dont call me shirley.
You are only taxed on the gain, it is a capital gain. Collectibles are capital assets as I understand it.
A couple of thoughts. First, both the buyers fee and the sales tax at an auction house effectively fall on the seller. So e.g. if Winebid charges you a 15% sellers fee, and they are also charging the buyers the buyers fee plus sales tax which add up to something like 25%, the seller would expect to only realize about 60% of the market price of the bottle (unless you get lucky and someone bids over market). Someone above claimed that they received 90% of the expected market value of their cellar. It seems to me that would be possible only if an auction house charged no sellers fee AND refunded part of their buyers fee to the seller – e.g. buyers fees are usually 20% plus so at least 10% of that would have to be refunded to the seller to get up to an expected valuation of 90%.
Second, in terms of hiring an appraiser, have people seen the market valuation software that is now available at a lot of wine storage facilities? I think it’s called “wineowners” or something like that. I use a storage facility that recently made that available and effectively provides a computerized appraisal of your bottles. It’s not perfect but kind of neat, seems like that would make an appraisal unnecessary.
Collectibles are taxed at a max rate of 28% vs the standard 15/20% rates for normal.cap gains. So better than ordinary income, but not as good as gain on a sale of stock.
Collectibles include wine.
If you really want to geek out:
Spectrum will give you a purchase price or work out a percent of the auction price. They will pick up. Jason will give you a very fair cash out or auction percent. I have worked with him many times and was always pleased.
Great Scott!
ah, okay, collectibles is some weird american nuance.
I mean it sounds like it’s effectively the same as capital gains, except a special category thereof.
Anyway, point being, its definitely not income.
To be clear, my net was 90% of the value provided to me by Winebid, which valued each bottle at the proposed opening bid. I didn’t compare these opening bids to the market value for each bottle, but I agree that they must have been systematically lower by an amount equal to the buyer’s premium. Had everything sold at the opening bids, my net would have been 84% of the total value provided by Winebid. Because some stuff received multiple bids, my net worked out to be 90% of the cellar estimate. Again, I’m sure that it was a lot less than 90% of “market”.
Collectibles are simply taxed at a higher tax rate than the capital gains rate for public stocks. Other than that it is pretty much the same. I’ve never seen anything good on computing the basis for wine. There are other costs associated with storing wine (temp controlled storage etc) which I’d think one can include in the basis but I’m not a tax person.
P.S. If I assume that the sales prices including the 17% buyer’s premium are market, then my net was about 77% of market.
Try Heritage. I’ve sold through them a number of times. Depending on the total value of the consignment, you can negotiate the seller’s commission. I’ve paid 7.5%, and for a very large collection I’m confident you can negotiate an even lower rate.
Plus, settlement is 6 weeks post auction.
What is considered"very large"?