Yes, you would indicate you closed the business if you are now only investing for your son, even if you end up selling some of the cards at various intervals. These will be sales of collectibles and considered investment income or loss.
The X-box consoles would be either a hobby or a business and is distinctly different than the investment for collectibles. It would also be a separate business than the one for card purchases and sales.
As indicated previously, the rules for a hobby versus a business is very different. However the intent and profit would be determining factors. See the hobby versus business rules below.
This IRS link will help you: Business or Hobby?
Key elements:
- 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.
- 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.
Use the links below to see how to report.
To enter hobby income and expenses in TurboTax please follow these steps:
- Once in your tax return, click on Federal Taxes tab
- Choose Wages and Income
- Scroll down to Less Common Income and click Start to to right of Miscellaneous Income, 1099-A, 1099-C
- Click Start to right of Hobby income and expenses
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