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Deductions & credits
You don't need any "official" organization or company in order for the IRS to consider the income you earned via E-bay, Amazon and any other method you used to sell your stuff through, to be self-employed business income. (I think you already realize that.)
I don't have a 'beginning inventory' I just have a spread sheet of ITEM NAME PRICE COST PROFIT/LOSS (AND some expenses)
Oh but you do. Keep in mind also that you went into this endeavor with the "intent to make a profit" too. In your first year of business, the Beginning of Year (BOY) Inventory balance *MUST* be zero. Doesn't matter if you purchased that inventory 50 years before you started your business either. This is because the IRS says your BOY Inventory balance *must* match exactly, your prior year's End of Year (EOY) inventory balance. Since you were not self-employed and in business for your self in 2019, the only possible way for your 2020 BOY Inventory balance to match the 2019 EOY Inventory balance, is if the BOY Inventory balance for 2020 is zero. Period. So here's how this works for 2 years, assuming 2020 is the first year of business.
BOY Inventory Balance = $0 - This first year it "does not matter" if you purchased that inventory50 years ago. The BOY has to be zero so that it will match your prior year's EOY balance (which *has* to be zero since the business did not exist in 2019)
COGS (Cost of Goods Sold) = $1000 What 'You" paid for the inventory you actually sold during the tax year. It does not matter in what tax year you purchased that inventory either. This figure can also include inventory that you "literally" had to throw in the garbage because it was no longer salable.
EOY Inventory Balance = $2000 - What "you" paid for the inventory in your physical possession and not sold, on Dec 31 of the tax year.
Doing the math, you can see I started the first year of business with no inventory, sold $1000 of that inventory and ended the tax year with $2000. That $1000 is deductible from my gross business income.
If I want to close my business in 2020, one of the requirements is that I must have an EOY inventory balance of zero. One way to achieve this is to indicate that I removed $2000 of the inventory for personal use. That $2000 is fully taxable income too.
I had assumed that the cost of those items would be some sort of deduction rather than a nanipulation of intentory for COGS
Doesn't sound to me like you obtain these items for the purpose of resale with the intent to make a profit. If that's the case, then losses on personal items are never deductible, and never have been.
Since what you sold was books and other items that were your personal possessions, and based on the fact you "apparently" registered as a for-profit business with E-Bay (which is why they sent you a K-1), I would only include in the inventory those items that you "actually" sold. That would make both your EOY and BOY inventory balance zero. (that is, unless you continued to sell product in 2021 of course)
@Hal_Al is there a better way to handle this, even with a K-1? Can one do "inventory" with hobby income? I don't think they can.