Forever stamps and cap gains?


R

Rich Carreiro

[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
 
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P

Phil Marti

Rich Carreiro said:
Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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.
 
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P

Phil Marti

Rich Carreiro said:
Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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.
 
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S

Stuart A. Bronstein

Rich Carreiro said:
Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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
 
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B

Bill Brown

Rich Carreiro said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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.
 
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A

Avrum Lapin

Rich Carreiro said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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
 
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W

William Brenner

Rich said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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?
 
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S

Seth Breidbart

Rich Carreiro said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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
 
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J

Jonathan Biggar

Rich said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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.
 
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J

John D. Goulden

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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?
 
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D

Dick Adams

Rich said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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 www.usps.com and click 'Buy Stamps and Shop"

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

2000 stamps will cost you $820, but you will have no savings
until the next rate increase. My advice is to stock up on
them, but hold them until the first class rate goes up to at
least 51› for a whopping 24.39% profit after about 15 years.


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 <LoL>

Dick
 
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W

William Brenner

Rich said:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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?

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
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E

Ernie Klein

William Brenner said:
Rich Carreiro wrote:
[this is both silly and serious]

Now that the USPS is selling "forever stamps" (you buy them
at the then-current first class rate and can use them to
mail a piece of first class mail no matter what the rate has
gone up to by time of use), why doesn't the use of them once
rates have gone up trigger a cap gain? You bought it at $X
and are essentially redeeming it for $Y.
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 ? <g>

--
-Ernie-

<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ------------------------------------------------------- >>
 
S

Seth

Ernie Klein said:
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 ? <g>
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

[0] A trainload of beans was bought and sold many times with
the price varying with the market. After a few months,
somebody asked the then-current owner "Aren't those beans
pretty rotten by now?" The reply: "Those beans ain't for
eating, they're for buying and selling."

Moderator:
That is very funny. Was there actually a trainload of
beans or was this a commodities market transaction? I
recall exactly where I was the moment I realized that in a
certain commodities market transaction, there were no eggs
and even if there were, you couldn't have them unless you
were a licensed buyer!
 
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S

Seth

A trainload of beans was bought and sold many times with
the price varying with the market. After a few months,
somebody asked the then-current owner "Aren't those beans
pretty rotten by now?" The reply: "Those beans ain't for
eating, they're for buying and selling."

Moderator:
That is very funny. Was there actually a trainload of
beans or was this a commodities market transaction?
The way I heard it, there was an actual trainload of beans
moving around Europe.

Seth
 
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