"Activity improving collection"

J

johnwilliamson062

Moderator
I have read several places that a C&R can do some borderline selling things like buy 8 guns of a model, keep the best and resell/trade the others as long as it isn't for a profit that is taken out as earnings.

For instance(and don't nit pick the prices quoted as this is an example, not a plan), I buy a crate of 8 "hand select" Mosin-Nagants for $99.95 +shipping for a total of $840, keep the best one or maybe two if two are good, sell the other six(rusted, non-match, bad barrel, etc) for $125 each or $750. I put this $750 back into my "C&R Fund" that is kept separate from other monies for future purchases or go out and buy some other C&R guns, then I am fine.

Some have said I can only resell at cost or less for this type of activity. $840/8 = $105.

Is anyone doing this sort of selling/trading? Does anyone know of a case of someone having trouble for this type of behavior? Anyone have an ATFE clarification of this issue?
 
this is a gray area that I have also been quite curious about.

something about it does not seem to fit quite right however anyone is free to sell rifles from their own collection. on the other hand it would look very suspicious if you were ever audited by the ATF and out of the 75 guns you used your license to acquire only 22 were still in your collection that would be incredibly hard to justify allowing you to keep your license.
 
The regs mention specifically that you are not to buy and sell with livelihood or income replacement as a goal. I have sold many C&Rs but then again, me selling 10% of my collection would be me selling 100 guns;)

In the end, they could just take your license away, but for prosecution, they obviously need to have a strong enough case to assume they win. However, since its vague, they likely would have a tough time winning a case unless you were buying 50 model X rifles and selling 48 per year, which then is pretty obvious. The people that suggest you have to sell to break even aren't being realistic. The regs do not say its illegal to sell a gun for $250 that you paid $200 for, as long as you are bettering your collection. If you had employees or a store front, but a C&R, then you would get nailed because at that point, you are attempting to draw income, and thus making a business of the C&R. Its important to understand these distinctions, and to not use ignorant blanket statements.
 
seems it would come down to intent and the money involved.

if your tax return showed that you had say $40,000 in income from a job, and you 'made' another $1000 buying and selling guns, then as a percentage, the 'gun income' is a very small percentage of your overall income.

but if your 'gun income' is a larger %, say 50%, and you did that for several years running (just one year you could argue that you were thinning things out), then your activity becomes harder to justify.
 
In general, the feds have been looking closely at C&R licensees who buy in quantity and sell many/most of their purchases to NON-licensees.

The C&R License was intended to allow real collectors to swap and trade with each other without going through dealers. It was not intended to alllow a "collector" to buy hundreds of guns to sell to the public, arming the deer hunters (or street gangs) in a 50 mile radius.

If collectors work within the spirit and intent of the law, things will be OK. But if too many of those rifles bought by the case turn up in the wrong hands, it could mean goodbye to the C&R designation.

Jim
 
if your tax return showed that you had say $40,000 in income from a job, and you 'made' another $1000 buying and selling guns, then as a percentage, the 'gun income' is a very small percentage of your overall income.
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Including the sale of guns from your C&R collection as income on your taxes? WOW never heard of that one. If you do, you are basically admitting you are selling guns as a business, and therefore acting as a dealer. Which is not allowed by a C&R licensee.
 
There is no mention of "PRICE" in the required information for your bound book. Nor are you required to give or keep paper receipts (beyond the entry in your book) for firearms you transfer in or out of your collection. So how are they going to know if you did or did not make a profit on the sale of any particular firearm?
 
it's not a matter of profit it's a matter of you supplying large numbers of firearms to others without the proper licensing to do so. if a large number of the guns that you acquired with your C&R license are no longer in your possession then that means that they are out on the streets and even though they are not very likely to be used in a crime that still creates a large number of unaccounted for guns.
 
While some areas of these regs are vague, I don't think your example, is...

You would be buying those rifles with the INTENT of re-selling them for a profit, from the git go...that makes you a dealer, not a collector. IOW, you had no intent of keeping the rifles, from day one you purchased them.

Can't do that with an 03, I don't see any ambiguity there and believe it would be illegal.

Call BATF and ask 'em....
 
It seems to me that if a 03 FFL holder buys, say, a case of rifles with the INTENT of picking the best to keep and selling the rest, he is a dealer, not a collector. He doesn't need to INTEND to sell some specific rifle or rifles, he buys with the INTENT of selling, which is the definition of being in business.

In case it has escaped notice, the antis have been pushing for years to end the C&R category and the C&R license, claiming that 03 FFL holders do not keep proper books, do not perform NICS checks, and are a major source of crime guns. While I know of no evidence to back the latter claim, if they make it often enough (like the "gun show loophole") Congress will believe it.

Basically, if collectors lose the 03 license, it will be due to those greedy and irresponsible people who want to sell guns and make money without getting the proper license and going in business right.

Jim
 
You would be buying those rifles with the INTENT of re-selling them for a profit, from the git go
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So, what do you think if I do not profit?

Nor are you required to give or keep paper receipts (beyond the entry in your book) for firearms you transfer in or out of your collection.
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Most of the transactions I carry out are by e-mail and text. It wouldn't be too hard to put most of it together. I don't intentionally keep information beyond what is required, but it is mostly available anyways.

INTENT of re-selling them for a profit, from the git go...
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Not really. I have purchased multiple surplus guns before when I only really wanted one. There is a huge level of variance between examples when buying surplus from a place like J&G, Samco, SOG, etc. Even with hand pick selected. For instance I bought several 7.62 Nagant pistols and only liked one of them. In that case I held onto the others until I liquidated my collection in 2010(leaving country for work). The "good" one I had I sold for $150, one for $100, and the other I had a REALLY time getting rid of for $50. The first two to the same person who knew a decent amount about them and refused the third. The third to someone who just thought they looked funny. Bought from same source with same quality selection.

So, I had $150 tied up into two guns that I could have better spent on something else, or maybe only $50 as the mid condition one made a good shooter. Not to mention room in the safe which is a greater concern for rifles.

When I had my license before I bought about one decent $400+ gun a year and 3-4 of whatever happened to flood the country that year. On the more expensive guns this wasn't a concern b/c I was usually buying a specific rifle I handled or at least saw photos of before purchasing. The 3-4 that were cheap I had little to no idea what I would get. Buying a few makes sense from a collection standpoint if I don't get stuck with the ones that don't meet the condition I don't like.

When I get my license the first thing I buy will probably be an M95. I won't buy just one though. I will likely buy 3-4. Hopefully one or two will be the condition I want from a collection standpoint(at least for this rifle at this point). What do I do with the others? I am looking into re-chambering one in a common caliber so I have one I can take to the range and let people shoot, but what to do if one or two are left? Of course, if all four show up in great condition, I would throw them all in the back of the safe. If I buy one at a time my cost will go up about 25%. More when dealing with handguns.

M1922 Springfield, BTW.
 
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There's no problem (IMHO) if you sell them to another collector or to a dealer.

I have a couple of guns in my collection that I could be persuaded to sell if a friend wanted or needed one. But I didn't buy them for that purpose. Truth be told, the whole concept of *selling* a gun is foreign to me. :)

Some have said I can only resell at cost or less for this type of activity. $840/8 = $105.
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If you have to apply a formula to it, any formula, you're probably over the line.
 
Yes, the rules may seem vague. And some people may well get by with doing exactly as is suggested.

I'm just the kind of guy who, if I tried it, the government would decide to make an example of. I'm way too old to go to jail.

I'll just continue operating to the letter of the law, and avoid any risk, myself.
 
Found the clarification (at least, as clear as they make it).
Comes down to whether or not ATF decides whether you fit the definition of "engaged in the business"...

Q: What does “engaged in the business” mean?
The term “engaged in the business,” as applicable to a firearms dealer, is defined as a person who devotes time, attention, and labor to dealing in firearms as a regular course of trade or business with the principal objective of livelihood and profit through the repetitive purchase and resale of firearms, but such term shall not include a person who makes occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms.

[27 CFR 478.11]
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So, my opinion has changed (but still, who knows...)....
Buy one crate, sell all but one of the best, once....probably OK...

Do this a few times a year, probably not...as that would constitute "repetitive".

JMO.
 
BATFE is deliberately vague on what constitutes doing business. Is buying 5 guns and selling 4 OK? Is buying 10,000 guns and selling 9,999 OK? The difference is, after all, only a matter of numbers. And if you sell those 9,999 to people who want to avoid filling out a 4473 and going through the NICS check, are you an innocent collector "improving" your collection or an unlicensed dealer?

Jim
 
If you're buying a crate of rifles with the intent to keep a couple or three and sell the rest, that is not in keeping with the FFL03 requirements. You are dealing in firearms and that is not legal.

If you're buying a crate of rifles, they all become part of your collection. If you later decide to keep three and put the rest aside to trade or perhaps sell to others over time, in order to acquire other C&R collectibles, that's fine. Buy one crate and get rid of the excess over a year or two, that's alright. Buy a crate each month and rent a table at the shows all year around, you are violating the FFL03 requirements.
 
enhancement of a personal collection or for a hobby
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And this is why I was previously advised to seperate my "C&R fund." Even when I liquidated my collection, which really sonsisted of only selling the low dollar guns like Nagants, I kept the funds separate. I still have that same amount of money set aside to purchase in the future. All the money remains "in the collection." THere is no removal of funds to support myself or anything. All money stays in C&R guns, well at least guns as there are a few things in my "collection" which aren't technically C&R yet.
 
And you do have to include on your 1040 any income you have for sales (no matter to whom) or capital gains you have from sale of guns you kept over a period of time. (Remember, ATF was once part of IRS and income tax evasion is one way to get illegal gun dealers.)

So, if you bought Colt SAA #1 for $2.50 when it was milsurp junk and just sold it for a million, Uncle Sam wants his share of that long term capital gain.

Jim
 
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