If an individual intends to buy watches with the sole expectation to sell them for a profit, they should consider establishing a separate LLC for this. According to the IRS, “net capital gains from selling collectibles (such as coins or art) are taxed at a maximum 28% rate”. With that said, establishing a business entity comes with a few key benefits, like being able to deduct expenses and losses. Registered watch investors can also take advantage of like-kind exchanges, which allows them to defer taxes if they invest the proceeds in a similar investment. There are, however, strict requirements around like-kind exchanges, so please consult with a tax professional beforehand.