Tax Question with collection....

[BergerKing22784]

So Ive got to the point where my collection of sports items is just out of control and I just have no space to keep it all. I mentioned to a buddy about selling some stuff but I didnt want to deal with the tax porition of it. He said as long as I dont sell it for more than I paid for it and take a loss I have nothing to worry about. That doesnt seem right.....

If when its all said and done I sell stuff I bought for 10,000 and sell for 5,000 (these numbers are made up) since I am selling for basically half my cost according to him I dont own taxes on it since there was no profit made. Can anyone confirm or deny this for me?

[nycpropain]

Re: Tax Question with collection....

He is clueless. Unless you have receipts for each item he is out of his face.

[tilley72]

Re: Tax Question with collection....

If you are selling items for less than you originally purchased them for than you would not owe income taxes on them. Basically since you are selling items you paid for already with taxed income, it would just be a return of capital. So if they were to tax you on it, it would effectively be double taxation on the same dollar, which does not happen at the individual level.

If you sold items, however, and made a profit on those items, you would have to pay income tax on the amount above your original purchase price for those items because you have yet to be taxed on those dollars.

When purchasing or selling items, it's best to keep all of the receipts present because if the IRS does come after you and you lack the proper paperwork, they may just say you owe taxes on the entire amount because there is no proof to back up what you originally purchased the item for. I know that this can be a lot of paperwork to keep on hand, but as always better safe than sorry.

Hopefully this clears it up a little for you.

-Andrew

[cohibasmoker]

Re: Tax Question with collection....

First off, take the time to speak to an accountant. My accountant once told me, "with the IRS, if you make money, its a business and if you lose money, it's a hobby". The penalties from the IRS are significant - only Politicians can get away with NOT paying their taxes - the rest of us have to pay.

Every item that I buy, I make a copy of the purchase. If I sell it, I make a copy of the sale. I have a excel spreadsheet that keeps a running total of sales, eBay and Paypal fees. At the end of the year, I take the entire folder to my account and he figures it all out.

It sounds complicated but when you do it, its actually very easy.

Jim

flaa1a@comcast.net

[PwKw13]

Re: Tax Question with collection....

Besides paying income tax on your gain, are you also paying sales tax on the original purchase??

[dcgreg25]

Re: Tax Question with collection....

cohibasmoker hit the nail on the head....speak to an accountant! It is not a good idea to offer tax advice on a public forum unless you are an accountant (or other tax professional) or to follow such advice.