We're Rich

By: Jeff Lovelady, CPA

I received a phone call from my father the other day informing me that he had sold the store that belonged to my grandparents in a little town called Guion, located on the White River in Arkansas. This store in its prime was one of two stores in the little town and they were right across the street from one another. I am sure if my grandfather was alive he could tell us some stories of the rivalry that may have existed.

Me and a buddy went up there early Saturday morning to do some trout fishing. The river was up so high there was no way we could put enough weight on the line to keep the bait running close to the bottom. Being diehard fishermen, we went ahead and decided to wet a hook. We fished for a good 2 hours, floating down and motoring back up and back down and up again. We did not get a bite, at least that we could tell because if you have ever been float fishing for trout, you realize it is hard to distinguish between bumping along the bottom and a trout snapping at your corn for lunch.

About 11 am, we decided to head back to shore to go help my father and brother clean some old stuff out of the store before the final closing on the sale. Nothing seemed to have been touched since the auction that took place before my grandfather passed in early 1998. Dust had settled on everything and mice had eaten away and made nests out of paper and string and old magazines. It was dark and stuffy in the store with no electricity to light our way, only flashlights, a couple of seams in the boards that covered the windows and the front door that was propped open.

My father and his sister and her husband had already gone through “all” the stuff behind the counter where my grandparents had kept a lot of old records. Well my curiosity got the best of me so I decided to just go and look myself. So I started digging and digging and digging and I found a lot of information pertaining to the operations of the store over the years that we bagged up and hopefully soon, I will be able to go and look through some of that stuff just to find out what was going on “back in the day”. I find that old stuff interesting. So I kept digging and digging and during this next search, I found a box that had been tucked back underneath the counter where it kind of looked like part of the counter. What was in this virtually intact cardboard box?

Upon opening the box, I saw a few old calendars from the 1960’s and some old progressive farmer magazines from the 1970’s and then I came across an old comic book that had the cover removed. It was a Batman comic, nothing special but I thought it was interesting so I kept digging and then there it was, it was like a spotlight had illuminated the box, the “Holy Grail” of comic books, with the cover still intact. SUPERMAN No.1 by Action Comics, June 1938, 10 cents, and low and behold, another one right behind it in the same condition. I looked at my father and said do you realize what this is? He said, “a comic book.” After stuttering and sputtering and some shaking, I proceeded to explain to him the significance of this comic book. It could be worth hundreds of thousands of dollars and we have two of them!

We delicately took the comics and placed them in the seat of the truck and proceeded to finish cleaning out the store. We were on cloud nine. I was trying to access the Internet with my PDA and was able to get on a site that showed the value at $80,000 in poor condition. When I got home I did some more research and my dad was calling me and I was calling my brother and we were all researching the value of this comic book, $400,000 to $1,000,000 is what we were estimating.

I found an auction web site for a company that auctions rare comic books. I emailed the VP of the comic book auction division explaining to him the find and describing the book to him. This was on a Saturday night. We were counting the money and spending it all at the same time. I did not expect to get a response from him for a few days and was searching for places we could go to get it appraised. Upon awaking Sunday morning, I saw where he had responded to my email, asking me to measure the dimensions of the comic book and I did, 10 inches by 13 inches. If you know anything about comic books, you already know the rest of the story, the comic book was an exact replica of the original that was produced around 1974. It is identical in all respects except the dimensions. The original that was produced in 1938 was 10 inches by 7 ½ inches.

After deflating our Robin Leech balloon, we were discussing the impact of taxes on something of this nature and this brings about an interesting question that I will pose to everyone. Of course, being a CPA, I know the answer but I thought if would be fun to see what thoughts are out there in this regard. Kind of like buying a vase for $50 and finding that it had $10,000 in $100 bills stuffed inside, do you report the gain? The answer is yes you do. So, if the comic book had been worth $400,000, would my father have to pay taxes on the sale of the comic book, and if so, what would the basis be, considering he took one and my aunt took the other?