Forever stamps and cap gains?

I'd argue that you paid for future service when you bought the stamp. It's the same as an advance purchase plane ticket vs a walk up fare. IIRC they won't be sold until the next rate increase, and I know I haven't seen any rules. If a secondary market does develop, either legitimately or a black market, then you would have a taxable gain when you sold them.

-- Phil Marti Clarksburg, MD

I'd argue that you paid for future service when you bought the stamp. It's the same as an advance purchase plane ticket vs a walk up fare. IIRC they won't be sold until the next rate increase, and I know I haven't seen any rules. If a secondary market does develop, either legitimately or a black market, then you would have a taxable gain when you sold them.

-- Phil Marti Clarksburg, MD

For the same reason you don't have taxable income when you use coupons in the grocery. It's a discount (that you pay for by paying in advance and giving the seller the float) rather than income. Stu

You're prepaying for a service so the fact that others are paying more for the service by the time you use it doesn't have a tax effect. I generally dislike analogies but here is one anyway. If your logic is correct, when I fly for $400 sitting next to someone who paid $900 for the same flight, I should recognize $500 of income.

If you bought gas at $2.00 a gallon and used it when gas costs $3.00 a gallon you wouldn't call it a capital gain. If you sold it at $3.00 a gallon you would either consider it a capital gain or a profit to be declared on a Schedule C

If one purchases a tomato today at $1/pound and consumes same tomato two days later when the price of tomatoes has risen to $1.15/pound, does that constitute a capital gain?

I bought a service (having one letter delivered) and I get that service. I bought an airline ticket for $275; the day I flew, it would have cost $800. There's no capital gain for _using_ it. If I _sold_ the stamp for the higher price, that's a capital gain. If I use it in business, the deduction is for the amount paid, not the current price. Sometimes a particular item (e.g. car) gets very "hot"; you might buy one for $15,000 from a dealer, to be delivered next month; by the time it arrives, it's selling for $20,000. If you keep it, there's no capital gain. Seth

It would be a capital gain if you sold the stamp to someone else for $Y. If you just consume the stamp by using it, there's no gain, because you bought the right to post one letter and you used it. Tax laws don't seem to require you to revalue a pre-purchased service at the time that you use it. It would be a nightmare to comply with a rule like that.

-- Jon Biggar Floorboard Software snipped-for-privacy@floorboard.com snipped-for-privacy@biggar.org

I'll take a stab at it. If you bought a bunch of "forever stamps" at $.42 and, later, postage went up to (say) $.47, you would have an unrealized capital gain of a nickel per stamp (on a passive investment, with all investment at risk, and not in a registered tax shelter). You'd have to SELL the stamps to realize the gain, then you would have to pay taxes on that gain. However, if you USED the stamps for postage, you have no gain. Furthermore, I'm guessing that if you use the stamps purchased at .42 in your business during a time that stamps were selling for .47, you deduct what you originally paid for the stamps, not their current value. Unless the letter comes back undeliverable for some reason - then your loss is the current value of a first-class stamp, right? I'll speak to the programmers at the tax-prep outfit where I work about getting that into the software for next year. "Did you realize a gain on the sale of 'forever stamps' last year?" An answer of "Yes" can take us straight to Schedule D for entry of the basis and sale price. Oh, dear, which depreciation schedule should you use for forever stamps?

-- John D. Goulden

As every knowledgeable person will tell you, you have prepaid for a service and that has no tax consequences upon consumption of the service, only upon sale of the service.

Go to

USPS is selling "forever stamps" at 20 for $8.20, but I have no idea when the rate change goes into effect.

A great investment they are not. Give them as gifts to your grandchildren so they have one less excuse for not writing.

It will not surprise me if the IRS raises them to FMV in an estate

Dick

If one purchases a tomato today at $1/pound and consumes same tomato two days later when the price of tomatoes has risen to $1.15/pound, does that constitute a capital gain?

But if I keep the tomatoes for a month and the price goes up to $3 a pound do my, now rotten, tomatoes turn into a capital loss ?

--

-Ernie-

If you bought them for investment (which is unlikely except for beans[0]), yes. If you bought them for use in your business, it's ordinary loss. If you bought them for personal use, no deduction. Seth

The way I heard it, there was an actual trainload of beans moving around Europe.

Seth