How do I best report approximately $90,000 in eBay sales from personal property inherited from a parent with no profit?

[jfields1]

My father passed away in 2021, leaving behind a considerable number of antique toys and collectibles. I sold a large portion of them on eBay, to the tune of approximately $90k (gross sales). Most of the net sales proceeds went to my mother. My father kept great records, meaning we have original receipts for enough items that we can establish that the overall amount sold was lower than the amount originally paid. Since I sold the items through my eBay account, I have to take care of reporting the sales on my tax return. What would be the easiest way to go about this so that I don't get hit with a big tax bill? I'm self-employed for my "real job," so I'm using TurboTax Self-employed, if that would be advantageous to use in any way. Thanks in advance!

[JohnB5677]

There are several issues here. 

Your mother is the recipient of your Dad's estate, plus she originally owned half of it.  To calculate the basis of the antique toys you should take 1/2 of the value at your Dad's passing, and add it to 1/2 of the original purchase price.

Collectibles are considered alternative investments by the IRS and include things like cards & comics, rare items, antiques, and so on. If collectibles are sold at a gain, you will be subject to a long-term capital gains tax rate of up to 28%.

You will still have to post this to your tax return.  You will separate the items you had a profit on from those with losses.

You will only post the ones with a profit. (Be sure to keep that record as documentation)

Go to Wages & Income

1. Scroll to Investments and Savings

2. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)

3. Time to kick off your investments! = Okay

4. Time to kick off your investments! = Continue

5. Let's import your tax info = Enter a different way

6. There are five boxes available

   1. Interest

   2. Dividends

   3. Stocks, Bonds, Mutual Funds

   4. Cryptocurrency

   5. Other

You will select Other

[jfields1]

Thank you for your reply!

Regarding the value of the items at my dad's passing: would that be the price they were sold for, or do I need to determine the value of the items another way?

Thank you again!

[LeonardS]

From your post, it does not appear that any of the items were appraised therefore you will use the cost for the item as its  "basis" and the sale price as its Fair Market Value (FMV).  For example; if you sold an item that cost $350 with an FMV of  $250,  you would have a capital loss of $100.  The post provided by @JohnB5677 provides detailed information on reporting the eBay sales.

@jfields1

[Edited 03/08/2022 | 2:27pm PST]

[jfields1]

Alright, so just to be sure I'm doing this correctly:

-I'll take half of the cost of the item as its basis (or do I use 100% of the cost?)

-I'll take its sale price as the Fair Market Value

-I'll subtract the cost basis from the Fair Market Value

-If the Fair Market Value is below the cost basis, it's a capital loss, and I don't have to report it on my return

-If the Fair Market Value is above the cost basis, it's a capital gain, and I do have to report it on my return

Questions:

-If I can't find the original cost of a particular item, what do I use as its cost basis?

-Do I need to report each item with a gain individually, or can I do it as one lump sum?

-On the items with a gain, can I reduce the gain by adding in the cost of shipping, eBay fees, shipping materials, etc.?

Related: One individual advised me that I could zero out the numbers reported on the 1099-K forms (equal gains to losses) and make a note indicating that I was passing this income to my mother and then work through the forms on her return. The 1099-K forms have my social on them, so is that possible? I've gotten different answers on this.

[JohnB5677 · Accepted solution]

FMV is the agreed-upon price between a willing buyer and seller, both of whom are reasonably knowledgeable about the property in question.  Since your Dad passed in 2021, and these items were sold in a timely manner in 2021 it is reasonable to conclude that everything sold at fair market value.

Therefore, I suggest that you make one entry for the 1099-K that reflects a transaction like a stock sale.  

• It would be a noncovered Short term sale. 
• The date acquired is the date of your Dad's passing
• The date of sale is "Various"  or the date the last transaction took place.
• The value for cost basis is the same as on the 1099-K
• The proceeds are also the same as listed on the 1099-K

This will correctly exclude this income from tax as an inheritance should be.

1. Scroll to Investments and Savings
2. Select Stocks, Cryptocurrency, Mutual Funds, Bonds, Other (1099-B)
3. Time to kick off your investments! = Okay
4. Relax. We got it.= Continue
5. Let's import your tax info = Enter a different way
6. Select what you want to post from the 5 boxes.
7. Other = Continue
8. Continue through the interview

[Hal_Al]

Did your parents live in a community property state?  If so, the entire cost basis of the property "steps up" to Fair Market Value (FMV) rather than just half. 

[jfields1]

Thanks for your help, everyone. I was able to file today.