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penchevam
New Member

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

My friend's parents are moving and he is helping them by selling their furniture. His parents bought the furniture, but because he's doing all of the leg work, he'll take the funds from the sales. In this case, does he need to report the funds as income? His parents don't have the receipts for the original furniture cost.
8 Replies
rjs
Level 15
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

It sounds like your friend is acting as an agent or broker for his parents. They are paying him for his services by letting him keep the proceeds from the sales. That means it is all taxable income to him. Since this is a one-time activity (he doesn't regularly sell other people's furniture), he can report it as other income on his tax return.


It's not your friend's furniture, it's his parents' furniture. So the amount of income to your friend doesn't depend on how much his parents paid for the furniture. Whatever money they let him keep is payment for his services, and is all taxable income to him.


The money from the sale of the furniture belongs to the parents, since it's their furniture that's being sold. The fact that they use the money to pay their son for selling it doesn't change the fact that it is initially their money. If any item is sold for more than they paid for it, they would have a profit, which they would have to report as income on their tax return. But used furniture (other than antiques) would normally sell for less than the original cost, so they would have a loss, not a profit. They can't deduct a loss on the sale of personal property, so they do not have to report the sales.


If any antiques are involved, the situation might be different.


The tax treatment would be completely different if the parents gave the furniture to your friend as a gift. But that's not what you said is happening. If they gave him the furniture as a gift, he would be free to do whatever he wanted with it - keep it, throw it out, give it away, or sell it. But that does not seem to be the situation.

 

Critter-3
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

If the total sale was less than $15k I would call it a non reportable gift.  

TomD8
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

I agree with @Critter-3 , but i think the dollar limit would be $30K -- $15K from each parent.

 

No tax issue for the parents if furniture is sold at a loss, or if their "gift" to son is less than $30K.  No tax issue for son in either case.

**Answers are correct to the best of my ability but do not constitute tax or legal advice.
Hal_Al
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

I'm of the opinion that what you describe is a gift situation, not compensation, particularly since the parties are related.   The parents have given your friend the furniture.  The cost basis in a gift is the giver's basis.  It's safe to assume used furniture has been sold for less than the original cost, so there is no gain (profit) on the sale.  So, none of the sale amount is taxable income to your friend.

 

Technically, if the used furniture is worth more than $15,000, the parents  would be required to file a gift tax return.

 

"Gift Tax" is somewhat of a misnomer.  Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/...

rjs
Level 15
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

"he is helping them by selling their furniture."
"because he's doing all of the leg work, he'll take the funds from the sales."


That doesn't sound like a gift to me. It sounds like paying him for doing the "leg work." He's selling "their furniture," not his furniture. But they can probably get away with calling it a gift.

 

Critter-3
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

Since he’s not in the business of used furniture sales and he’s doing this as a favor for his parents then I think we can still classify it as a gift. Things could get tricky if he sells them through somebody like eBay and he gets a 1099 form for the sales then we can revisit this post.

Critter-3
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

Since he’s not in the business of used furniture sales and he’s doing this as a favor for his parents (where this will not be a taxable event to them) then I think we can still classify it as a gift. Things could get tricky if he sells them through somebody like eBay and he gets a 1099 form for the sales then we can revisit this post.

Opus 17
Level 15

Can you count your sold furniture as income? Do you have to show how much it cost originally? Do you have to prove you bought it originally?

What this young person needs to do is to get his parents to help him document each item of furniture, including a brief description, how it was acquired by the parents (as a gift, purchase, or inheritance), the approximate date, and the approximate cost (if purchased or gifted) or the approximate value on the date of the previous owner's death (if inherited). A photo would also be very helpful.

 

This information represents the parents' cost basis in the items.  When the parents give the items to their son, he also receives that cost basis.  If he sells for less than the cost basis, he has a loss that is not deductible because these are personal items.  If he sells for more than the cost basis, he has a taxable gain.  The gross proceeds are not taxable, only the amount they are more than the cost basis (if this is even possible with used household items). 

 

By getting the documentation now, he will know how to include the sales on his tax return (if any items are sold for more than their cost basis) and he will have the information to defend himself if the IRS tries to assess income tax based on the gross value of the sales. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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