@user3143 wrote:
Thank you for your response.
The total of my 1099 K's from paypal and ebay is $4974.66.
If I am understanding you correctly, I do not have to claim this amount as income if I can show that I sold the item for less than what I paid?
What if I sold something for $38.00 and paid $25.00? Do I report the difference in what I actually did make?
Thank you so much,
Stacy
Basically, you are correct. You should have a spreadsheet showing the purchase date, cost, description, selling date, and selling price. (For items that were gifts, you need the date of the gift and the approximate price paid by the giver, as best you can determine. For items that were inherited, you need the date of death of the previous owner and the fair market value of the item on that date.)
If you sell items for less than their purchase price, you technically have a loss, but you can't deduct losses on personal property. If you sell items for more than their purchase price, you have a taxable capital gain. If the item was held more than 1 year, you can use the lower long-term capital gains rate.
You would take your spreadsheet and report the income from the items sold for a gain, ignoring items sold for a loss (the losses do not reduce your gains). You could report the total gains as hobby income, or you could report the individual gains as capital gain sales (sale of stocks, bonds and other property) on schedule D, to take advantage of the lower capital gains rate, but this would require listing each item of property separately. (But also note, sales of coins and collectibles are taxed as ordinary income even if you owned them more than 1 year.)
If the IRS sends a letter asking why you reported income different than the 1099-K, you would reply with a letter of explanation and other detailed proof, your spreadsheet, copies of other records, and so on.
