Hi,
Unfortunately, the IRS will consider this to be income unless you sold the items for less than you paid for them (or your basis when you inherited them) and make the necessary adjustments to the reported income on your tax return (note, you should report the 1099-K, failure to do so will likely result in an IRS notice down the line). Let's take this one step at a time:
- You mentioned this was a hobby. You can reduce the hobby income reported by the cost/basis of the goods up to the sales price (you can't take a loss on a hobby). See this link that tells you how to do that in TurboTax. Unfortunately, since the Tax Cut and Jobs Act passed, hobby expenses like advertising, etc. are no longer reducing hobby income. You can read more in this article. There's lots of other helpful information in there too.
- If you do start to consider this a business, you can deduct your expenses without receipts. However, the IRS can and likely will challenge you on that, so be prepared for a fight if you are audited. This article talks a bit more about that.
- In either a hobby or a business, you would need to know your basis in your inherited property. This IRS web page talks about that.
Please cheer below if this response is helpful!
Best,
Karen
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