[Anonymous]

Hi Everyone,

Random question…for tax purposes, if I found something that is worth $2K and it increases to, let’s say, $3K by the end of the year…which value do I include in gross income?

Thanks

[J]

Interesting question. I do not have a definitive answer, but it seems logical to me that you would report income of $2,000, and that amount would become your basis for the property. Your holding date would begin on the date that you found the item.

[soxfan866]

I would think you would recognize either $0 or $2,000, then the gain on sale when that happens. Interesting question, I don't think I've come across anything like that while studying for REG.

[SeattleAccountant]

@CPA-slave, looks like it has to be recorded at 2K not 3K.

“Treasure trove/Found Property…..IRS Pub 17 (and Pub. 525) state: Found property. If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is in your undisputed possession. The found property would be income to the extent of its FMV at the time it was found. ……

The value of treasure found is included in gross income at the time of the discovery. The amount realized from the sale is included in gross income at the time of the sale. However, the sales proceeds are reduced by the amount of the taxpayer's basis in determining the gain from the sale. The taxpayer's basis is the amount included in income at the time of discovery….

You pay tax on it in the year in which you find it, based on its FMV at the time it comes into your undisputed possession.”

source: https://www.taxalmanac.org/index.php/Discussion:Found_Non-Cash_Treasure_FMV

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[Jaimcpa]

Makes sense.

You find it at 2k. That's what you report it as.

It increases in value by the end of the year but no realization event has occurred, so, its still the 2k.

If you do happen to sell it by year end, you're taxed on the gain (fmv-basis).

FAR- 73, 10/07/2013
REG- 8/31/2013
AUD- TBD
BEC- TBD

MAcc
Main: Becker Self-Study 2013. Supplements: Ninja / Wiley TB / CPAExcel (Bought before I received an offer).

[Author]

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