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When you say collectibles, I think you mean something a little different than the IRS definition of collectibles.

Going with the per dollar amount you mention i.e. under-$50 items, I'm guessing you are talking about cookie jars, Precious moments, plush toys, etc. -type of items, while I think the IRS usually thinks of collectibles as higher dollar items- art, furniture, rugs. etc. Then again, stamps and coin collection also fit in here somewhere.

From IRS Publication 17
Any property you own is a capital asset, except the following noncapital assets.

Property held mainly for sale to customers or property that will physically become a part of the merchandise that is for sale to customers.

is probably more representative of your scenario

As to your question, I will defer to the tax pros for the proper answer. However, I suspect that as long as you use an average cost (for items paid with cash) that is not very out-of-whack with the cost per item of other items in the collection, you probably will not trigger an IRS inquiry. This would allow you to establish a cost-of-good basis for each item

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