Elijah Wood famously portrayed Frodo in the iconic “The Lord of the Rings” film trilogy, courtesy of New Line Cinema. However, this summer, the coveted “One Ring” was not found in Middle Earth but rather in the city of Toronto. If the lucky finder decides to sell this precious item, they may have to pay a significant amount in taxes, potentially as high as 53.53%.
In this case, the One Ring in question is not the physical ring from J.R.R. Tolkien’s trilogy, but an ultra-rare playing card from the game “Magic: The Gathering.” This card, known as “The One Ring,” was part of a special Lord of the Rings-themed set released by Wizards of the Coast in June. Only one copy of this card exists, and bids for it have reached into the millions of dollars.
Several interested buyers, including a game store from Spain and a collectibles shop near Buffalo, New York, have made seven-figure bids for the card. Wizards of the Coast confirmed the discovery of the card in Toronto by an anonymous individual.
While lottery winnings are tax-free in Canada, the finder of The One Ring card would be subject to taxes on their profits from selling it. Canada has an “inclusion rate” system, where only a portion of profits is considered taxable income. In this case, it is likely that half of the profits would be taxed at Ontario’s top tax rate of 53.53%, resulting in an effective tax rate of about 26.8%.
The exact tax rate on the profits would depend on various scenarios and factors, such as the method of acquisition and the intent of the seller. There is some ambiguity in Canadian tax law regarding these situations. In the United States, capital gains tax treatment is determined based on the duration of holding an asset. Short-term capital gains are taxed at ordinary income tax rates, while long-term capital gains receive preferential treatment. Collectibles are taxed at a higher rate than stocks.
Overall, the finder of The One Ring card stands to potentially owe a substantial amount in taxes, depending on the final selling price and the applicable tax rates.
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