Tax

Wine is like any other asset and the seller must pay tax on any gain made on the sale of the wine. This is different to the British wine investing world, where wine is considered a ‘wasting asset’ and therefore the gains are not taxed – now there is a civilized country.

After you have held your wine for a year it is considered a ‘Collectible’ which the IRS defines as ‘any work of art, any rug or antique, any metal or gem, any stamp or coin, any alchoholic beverage, or any other tangible personal property specified by the Secretary’. Don’t you just love that last clause!

Collectibles are taxed at a flat capital gains rate of 28% under Internal Revenue Code (IRC) section 1(h)(4). Selling your wine before you have held it for a year, incurs short term capital gains which is dependent on your income.

However this 28% should only applied to gain on that investment. That means that you can add the following to your cost basis when calculating the gain:

• Storage
• Shipping
• Insurance
• Commissions
• Any miscellaneous cost

In addition you can make the case that you can also deduct:

• Any losses you have incurred on selling your wines
• Any losses due to breakage in your wine investment collection

You cannot deduct (although it does not seem fair):

• Wines that you have drunk!
• Wines that are corked or spoilt

Currently the IRS does not have an automated manner of gathering the sales information needed from wine retailers or auction houses to flag a taxable event. Auction houses tend to provide confidentiality for their consignors. This is why you often see catalogues with cute refere