You can deduct the cost of the warranty since that is what they are buying. Your purchased it for $2,000 and they bought it from you for $9,400 so the difference would be your capital gain. You could report it as an investment sale. They may issue you a Form 1099-MISC however. If so you would enter that in as "other income" and then enter an adjustment to back out the income, then enter the sale in the investment income section.
You can make that adjusting entry in TurboTax as follows:
1. From the Federal menu in TurboTax find Wages and Income
2. Find Less Common Income
3. Choose Miscellaneous Income, 1099-A, 1099-C
4. Choose Other Reportable Income
5. Enter a description of the adjustment (invest inc misreported) and the adjustment as a negative number
You enter investment sales in the Wages and Income section of TurboTax, then Investments Sales, then Stocks, cryptocurrency, Mutual Funds, Bonds, etc... Choose "other" as the type of property sold.
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