Losses from pup
Except for “listed personal property” (described below), any losses on the disposition of PUP are deemed to be zero. In other words, there is no capital loss allowed on the disposition of PUP. Therefore, for example, if you hold a yard sale and sell personal items such as furniture, clothing, toys, or bicycles at a loss, you cannot claim the loss for income tax purposes.
On the other hand, one-half of gains from the disposition from PUP are included in your income as taxable capital gains from PUP. The only losses that can be claimed, and only against taxable capital gains from listed personal property (LPP), are one-half of losses sustained from the disposition of LPP, which consists of the following:
- Artwork,
- Rare books or folios,
- Jewelry,
- Stamps, and
- Coins.
If your losses from LPP in a year exceed your gains from LPP in a year, half of the excess losses can be carried back up to three years or forward seven years, but only to offset taxable capital gains from LPP in those years. Otherwise, the losses cannot be used for income tax purposes.
Minimum cost and proceeds
A special rule provides that any PUP that you sell is deemed to have a minimum cost of $1,000 and minimum proceeds of disposition of $1,000. This rule is meant to simplify record-keeping and tax reporting in respect of relatively nominal gains and losses.