@ThomasM125 wrote:
The discussion seems to center around the issue of what is considered income. Is it gross receipts, or gross receipts less the cost of the items sold? IRS publication 17 discusses hobby income on page 73, but does not define it, only to say that you can't deduct expenses related to a hobby activity, unless you report them on schedule A, which is not allowed for most filers in 2021. As a practical matter, if you report less than the amount reported to you on form 1099-K, you may receive a notice from the IRS somewhere down the road assessing additional tax for income you did not report.
Publication 17 Your Federal Income Tax
No one is disagreeing with the need to include some kind of report. The original question was how to report it (which we dealt with for 2021, and must wait and see for 2022), but there also seems to be a question of what exactly is taxable.
IRS publication 525 says:
Sale of personal items. If you sold an item you owned for personal use, such as a car, refrigerator, furniture, stereo, jewelry, or silverware, your gain is taxable as a capital gain. Report it as explained in the Instructions for Schedule D (Form 1040). You can't deduct a loss.
Pub 525 also says:
If you collect stamps, coins, or other items as a hobby for recreation and pleasure, and you sell any of the items, your gain is taxable as a capital gain. However, if you sell items from your collection at a loss,
you can't deduct the loss.
Ergo, the sale of personal items for more than your cost basis is a capital gain. You can't deduct selling expenses, but there is no rationale for claiming that the entire proceeds are taxable, even if you get a 1099. The trick is to prove it to the IRS.
There's also a Tax Court case I'm not going to bother looking up, involving someone with $20,000 of eBay sales who said it all came from personal items sold for less than the cost basis. The court agreed on principle that items sold at a loss would not be taxable income, but this specific taxpayer had no records to actually prove they were selling pre-owned personal items at a loss, so all the proceeds were determined to be taxable. Not because sales proceeds=income, but because bad record keeping=you're SOL. (The court also noted that since the taxpayer was an IRS agent, they had more reason than most to know better.)
