A woman was recently cleaning her garage and found an old computer so she "gave" it to a store that recycles computers. It turns out, it was an original Apple-I, worth (and sold to a collector for) $200k.
Assuming the woman originally paid $600 for the computer, what is the cost basis for the recycler? Since the computer was a gift, does he retain the cost basis of the donor and the gain is long term?
The woman was in California, and her husband had passed away. So: community property and stepped up basis.
It does not seem like the recycling center is a charity, so how does the woman treat this situation? Casualty loss? (Is ignorance a casualty?)
The recycling center's basis is zero, plus his expenses in the matter (ten cents).
If the recycling center finds the woman and pays her 1/2, as is its normal policy, that adds to the recycling center's basis.
And, such would be a sale, so the woman gets to declare a loss? Or was this personal property, not a collectable, due to her intent and ignorance?
I'd say the recycler's basis is zero (or maybe whatever cost he can allocate to accepting the item).
And I'd say his gain is ordinary income because he is in the "trade or business" of handling recyclable items. If he pays out a portion of the sales proceeds to the woman, I'd say that would be part of his "cost of goods sold."
The woman could probably treat her portion as long term capital gain. As to her basis, she could try to claim some stepped up amount based on her husband's death. But in the absence of an appraisal contemporary with the husband's death, I'd guess the IRS would disallow it.
MTW
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.