@Bsch4477 wrote:
If a taxpayer receives income for an activity that they don’t carry out to make a profit, the expenses they pay for the activity are miscellaneous itemized deductions and can no longer be deducted. The taxpayer must still report the income they receive on Schedule 1, Form 1040, line 21.
In view of the above from the IRS, I don’t understand how the OP can deduct the expense of buying the cards from income assuming that the activity is a hobby.
This isn't ordinary income, it's capital income, because it results from the sale of tangible personal property. As such, it is reported on schedule D, and the cost basis definitely comes into play. If the selling price is less than the cost basis, there is a capital loss. The loss is not deductible on sale of personal property, but neither are the proceeds taxable.
Selling expenses, as distinct from the capital gain or loss, would be things like eBay listing fees, credit card transaction fees, and postage and insurance to ship the cards to the buyers. You are correct that those expenses are not deductible.
