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Posted by irasmilo:
There is no such thing as a Luxury Item capital gains rate. There is a collectibles capital gains rate which tops out at 28%, that is, such capital gains are taxed at 5, 15, 25, or 28%. Guitars don't seem to fall within the IRS definition of collectibles (as presented in IRS Pub. 550, Investment Income and Expenses), but I would want to research further before concluding that regular long term capital gains rates apply.

And, yes, the tax is on the gain, not the sales proceeds. There are no exemptions to avoid tha tax.


Thank you for your insight!

Collectables Capital Gains may be the term that he used. I will encourage him to do more research on this. He mentioned that he would have to pay 28%, but he made it seem like it was 28% on the selling price. I told him that it would be a tax on the Capital GAIN. Either way, I think that is great news for him. Thanks again!
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