One compromise approach here might be for the taxpayer to concede that they did not keep proper records of the cost basis of these household items, assign a cost basis of zero, and pay long-term capital gains tax on the proceeds from the sale of these household items. That would be 15% capital gains tax, instead of 15% or 25% or 28% income tax +15% self-employment tax. It might be easier to get that past the examiner than to say that all these sales were household items below original cost basis without having the records.
