Unless you file Schedule C as a business, you can not report even one sale that resulted in a loss.
It would be as if you had a garage sale and sold 100 items at a loss, but one thing sold for a $100.00 profit.
You would need to claim and pay interest on the $100.00 profit.
If the 1099-K reports $500.00 and only that one thing made a profit, you subtract the loss from the 1099-K FIRST, then you report the sale that made the profit.
So lets say the thing that made a profit was something you purchased for $50.00 but sold for $150.00 so you made a profit of $100.00.
That means that $150.00 on the 1099-K was payment for that item, so $350.00 on the 1099-K was for things that sold at a loss. Subtract the things that sold at a loss from the 1099-K. That would be 500 - 350 = 150.
Now you know that you must account for the 150.00 on the 1099-K.
You do that by reporting the sale, someone paid 150 (sale proceeds) it cost you 50 (your cost/basis) which results in 100 profit. $100.00 is added to your income.
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