Selling a rare instrument, wine or art collection? Plan the ending first.
Meet Elena, a made-up seller with a $2.5 million cello and real math. One cello, four endings: sell it, be paid over time, put it in a trust, or give it to an orchestra.
In this class
- Why art, wine and rare instruments are taxed at up to 28 percent, plus the 3.8 percent investment tax
- Four endings for the same cello, side by side, with the numbers
- Selling it yourself? You control the terms, so you choose how you get paid
Watch the full class free
Enter your email and the full class opens right here. We also email you the link.
Selling an instrument worth $100,000 or more?
Book the free 15-minute call below, or the scope form. Hans takes a quick look at your instrument and your timing and tells you which option looks best for your sale.
Talk to Hans: free 15-minute call
Selling an instrument worth $100,000 or more? Pick a time. Hans calls you at the number you enter and takes a quick look at your best option: collectible or working instrument, when to sign, and how to be paid.
Two questions decide your tax rate
First, the clock: held it a year or less? The gain is short-term, taxed at ordinary rates either way. Held it more than a year? Then:
- Do you play it for a living (performing, recording or teaching with it)? Yes: a working instrument, taxed at 0%, 15% or 20%. No: go to question 2.
- Is it an antique or a work of art? Yes: a collectible, ordinary rates capped at 28% plus 3.8%. No: a plain capital asset, 0%, 15% or 20%.
At least the 3.8%: even if the IRS treated a working instrument as a collectible, the 3.8% investment tax usually does not apply to property used in an active business. On a $2.2 million gain that is about $80,560 on its own.
There is no age cutoff, so documentation and use decide question 2: who made it and when, the appraisal wording, and whether it is played. This is a grey area; we check your facts.
Questions musicians ask
Is my instrument a “collectible” to the IRS?
The tax code’s collectible list (IRC §408(m)) covers art, rugs, antiques, metals, gems, stamps, coins and alcohol. Musical instruments are not named, so an old instrument counts only as an antique or a work of art. If it is, the gain is taxed at ordinary rates capped at 28%, plus the 3.8% investment tax.
How long do I have to own it?
More than a year. Sell it after a year or less and the gain is short-term, taxed at ordinary income rates, whether it is a working instrument or a collectible. Teaching with it counts as playing it for a living.
When is it a working instrument instead?
When you use it in your work: performing, recording or teaching for pay, and you have held it more than a year. Business property is not a capital asset (§1221(a)(2)), and its gain is treated as long-term gain (§1231), which means 0%, 15% or 20%.
Should I sell before or after I retire?
Sell while it is still a working instrument. What it is gets judged the day you sign. If your income drops when you retire, taking the payments after you retire can lower the bracket too: in our sample, about $380,000 apart on a $2.5 million cello. If your income stays high in retirement, the win is mostly the classification itself, plus spreading payments so more of each year’s gain stays in the 15% band.
I’m not a musician. Does this apply to me?
If you collect, inherited, or play for fun, the instrument is never a working instrument. It is a regular capital asset, and it is a collectible only if it counts as an antique or a work of art. If you inherited it, you generally start at its value on the date of death, so a quick sale often has little gain.
Is a modern instrument a collectible?
Price is not the test. A collectible has to be an antique or a work of art, and the tax code sets no age cutoff for this rule. Most $100,000 instruments are less than 100 years old, so documentation and how the instrument is used matter most: who made it and when, the appraisal wording, and whether it is played. A modern instrument that is a working tool, not a display piece, has a good case for the 0%, 15% and 20% rates.
What about a 1992 cello by a maker who has died?
About 34 years old, and there is no age cutoff, so it comes down to documentation and use. But instruments by a well-known late maker can trade like art, which gives the IRS a stronger “work of art” argument. For a non-musician that is a grey area. For a working professional it does not matter: a working instrument is a working instrument at any age. An appraisal that describes it as a professional instrument, plus proof you play it, helps.
I own three instruments. What if I sell the one I don’t play?
Each instrument is judged on its own. The one you perform or teach with can be a working instrument. A backup you really use can be too, if you can show it. The one in the closet, bought as an investment or inherited, is likely a collectible, even for a professional.
How much do I have to play it?
There is no hours test. It comes down to the facts: concert programs, contracts, recordings and teaching records that name that instrument, an insurance schedule that lists it as business equipment, and wear from playing. A few gigs right before you sell will not change what it is.
I play in an orchestra as an employee. Does this apply?
Being an employee is a trade or business, so a working instrument can still qualify. Since 2018, employees cannot deduct instrument depreciation, so keep other proof of how you use it.
I took depreciation on my instrument. Now what?
That part of the gain is taxed as ordinary income in the year you sell, even if the buyer pays over time. The rest can still get the lower rates. Pull your old returns first.
Is this settled?
This is a grey area. The tax code and the IRS forms point to the lower rates for a working instrument (the Schedule D 28% worksheet does not pull from Form 4797), but no court or IRS ruling has said so directly. We check your facts before you sign.
Is there a minimum?
This planning starts with sales of $100,000 or more. The scope call is free. Book a time on this page, or text Hans at 213-340-2018.
Education, not legal or tax advice. Hans is an Enrolled Agent (EA), admitted to practice before the Internal Revenue Service. He is not a CPA, attorney or registered investment adviser; the analysis models tax effects and does not recommend specific securities. Examples are general and hypothetical; your numbers depend on your facts. Coordinate any decision with your CPA and attorney.
Hans Goldstein is an Enrolled Agent, admitted to practice before the Internal Revenue Service. Not affiliated with or endorsed by the IRS. General education, not tax or legal advice for your situation.
Conflict of interest: Hans is also a licensed insurance producer with a separately owned insurance business. That business is not part of this engagement, and the analysis does not recommend insurance products. If you later choose an installment sale funded through an insurance company, that company pays Hans a commission through his separate insurance business.
Hans Goldstein: Tax & Exit Planning, 1401 21st St, Ste R, Sacramento, CA 95811.