What counts as an "item" for a personal item sale?

[sydney1971]

I understand the rules for taxing personal items generally. If I sell an item at a loss, I can't take the loss. If I sell at a gain, I must have the gain taxed. That's clear.  

But what is an “item?” Say I have 30 blue glass beads and I sell them in person to one individual in one transaction for one dollar, I assume that transaction is one item and not 30. What if I sell 30 blue glass beads, 50 crystal beads, and a necklace made from similar beads for $5 in the same way (one person/one transaction). Is that 1 item (beads), 3 items (types of beads) or (unlikely) 81 beads

I sold almost all of my personal beads and some jewelry made with those beads in one big $5,000 sale to one person in one transaction. Obviously, I don’t have original prices on most of it, but can make educated guesses and I do have some paperwork.

From the IRS site: “A personal item is something you owned for personal use such as a car, refrigerator, furniture, stereo, jewelry or silverware, etc.” And that’s not clear because a chair is obviously one item, but silverware can be one fork, one set of silverware, 10 forks from different sets, etc. Also from the IRS site: “If you sold a mix of personal items at a loss and a gain, report losses and gains separately.” Again, what is a mix? Are glass beads and plastic beads a “mix” or “beads?” Are 2 forks from different sets a “mix” or “silverware.” It seems like all semantics, and I do not want to get into a battle of semantics. I just want to do it right.

It’s absolutely a huge loss as a collection of items that is considered “one item.” But when I show the basis to the IRS, the easiest way will be to itemize by type of bead, just like if you had 10 forks from 3 different sets it’s all still “silverware,” even if you break down the basis by set. So confusing. Thanks for any assistance.

[Vanessa A]

If you sold 80 glass beads in one sale, you could group them all together as one item as a set of beads.   You would not need to list 80 glass beads separately.  

If you sold a set of silverware, the set would be one item.  The set would be whatever you included in the set.  So if you included 10 knifes, 8 forks and 6 spoons, that would be one set of silverware that you sold as long as there was a special one in there that was sold at a gain when you sold the rest at a loss or vice versa. 

The items do not need to be broken down to bead by bead on y our return Class by class or sale by sale would be sufficient as long as you have the numbers to back the sale.  This is similar to stock.  If you have 200 shares of the same stock, you would not list each share individually, 

The biggest thing is if you sold a set of 80 beads that you paid $1 for each of them, then you sold $79 of them for $40 and one special bead for $100, the one you sold for $100 would need to be removed from the 79 other beads and listed as its own sale as you would have a gain on that one bead and a loss on the $79 beads. 

You do not need to break it down and "show it to the IRS"  instead, just enter it as grouped sales of gains and losses.  Then keep your spreadsheet of the breakdown with your tax records in case they ever have a question. 

[sydney1971]

Thanks. I understand the “set” idea better. I still don’t really understand mixed lots. Take this lot of 80 beads you mentioned. I’m not talking about selling them separately in 2 transactions of 1 bead and 79 beads. I am talking about selling a mixed lot of 80 beads for $140. If I bought them for $1 each and don’t have the time or inclination to look up the current value of each of 80 beads so I just put them all together in a lot, and someone sees one in my lot they could sell for $500 so they offer me $140 for the whole lot and I take it, I wouldn’t even know to pull out that one bead to report the gain on it. From the buyer’s perspective, they might be buying one bead and throwing out the rest, but from mine, I’m selling 80 random beads that cost $1 each and selling them all for $140.

I had literally a million beads in my ot I’m sure and probably 5,000 kinds of beads. Some were bought at retail, some given to me, some traded for. It’s just a big ole lot of beads to me. I have some receipts for parts of it, but even that is mixed. I might have a receipt that says $100 for 1000 glass beads, but I may not know which 1000 beads that was in the lot, just that they are somewhere in the lot.

Imagine your average crafter who buys a ton of different kinds of fabric over 20 years. People also give her fabric and she trades at swap groups and tears old clothing apart and keeps the fabric from that. She sorts it all by color because that’s how she likes it so she has no idea which of it came from where. She tells her daughter, put this all on FB Marketplace for me. The daughter takes pics of it all, lists it and sells it as one big lot (it’s not a set obviously) for $1000. How does this woman go about reporting this lot? Assume she has $3000 worth of receipts for some of what was in the lot. Is that one loss?

[DianeW777]

You understand clearly selling personal use items at a loss cannot be used to offset other income.  Although these concepts aren't complicated, recordkeeping is a must and falls to the taxpayer to provide and and prove the gain and/or loss. If there is no record that clearly and reasonably can show cost, then all of the proceeds are taxable gain.  This doesn't mean you can't keep better records going forward, or that you can't figure out the cost of sold items for 2024. A spreadsheet could be helpful in the future.

The tax law is clear.  The cost of any item for resale is what you paid for it, or the cost of any item(s) you traded for it.  Also, the tax law is very clear that the individual taxpayer is the recordkeeper of the information, required to supply it if and when requested.

You must decide what to use for cost, selling price and what sales do result in personal loss.  

There is a difference between a hobby and a business. For your review, here are the IRS guidelines on Hobby vs Business. You can decide if it is hobby or business income.  This IRS link will help you: Business or Hobby?

Key elements:

1. A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
2. A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS tax law is that you must show a profit three out of every five consecutive years to be considered a business.

Once you decide what type of income this is you can use the links below to see how to report.

• How do I report income from self-employment?

@sydney1964 

[Edited: 02/25/2025 | 6:55 AM PST]