A collector's item is an item that is worth much more than it was originally sold because of its rarity and popularity, as well as its condition. Collectibles aren't always such a common or such good investment. A collector's item is something that is worth more than what was originally purchased. That's the easiest way to describe it.
Nor does everything that is marketed as a “collector's item” in retail sale become one. It's an overused term that is often misused in an attempt to add value to a common object. A plan participant whose account purchases a collector item is considered to receive a distribution in the year in which the collector item is purchased. The amount of the distribution is the cost of the collector object at the time of purchase.
The amount must be declared to the participant on Form 1099-R. The distribution is generally taxed as ordinary income and an additional 10% tax may apply on early withdrawals if the participant is under 59 and a half years of age, in accordance with section 72 (t) of the IRC. See the corresponding treatment for ARI described in publication 590-B. A collector's item is anything whose value increases due to its immense demand and reduced availability.
In simpler terms, it refers to items that are “worth collecting”. Examples include vintage watches and jewelry, paintings, rare coins, antiques, and more. If an item has an additional value based on its rarity in a market, it is likely to be considered a collector's item for tax purposes. If you buy and sell gold or silver, or exchange-traded funds in gold and silver, they will be taxed as collectibles (since gold and silver are considered collectibles).