Unless you are engaged in the trade or business of selling products, the items you sold are capital assets and you have capital gain. Otherwise, the items are inventory and their cost factors in to the COGS.
If the items are capital assets in your hands (which is likely) and you were the donee (i.e., the person who received the items as gifts), then your basis is the donor's basis (the basis of the person(s) who gave you the items).
Regardless, you need to know the basis in your hands in order to calculate a profit or capital gain. If that cannot be determined, you have to use a basis of $0.
I understand but note the difference.
If this is a business, you would prepare a Schedule C and profit would be subject to self-employment tax (as well as ordinary income tax).
If this is a hobby, you would report the income as miscellaneous income, which is subject to ordinary income tax rates.
If the items are capital assets in your hands, then you would report the gain as capital gain which would be subject to tax at the capital gains rate.
Unless you are engaged in the trade or business of selling products, the items you sold are capital assets and you have capital gain. Otherwise, the items are inventory and their cost factors in to the COGS.
If the items are capital assets in your hands (which is likely) and you were the donee (i.e., the person who received the items as gifts), then your basis is the donor's basis (the basis of the person(s) who gave you the items).
Regardless, you need to know the basis in your hands in order to calculate a profit or capital gain. If that cannot be determined, you have to use a basis of $0.
Q. Most of the items sold were given to me free. Would the COGS (cost of goods sold) be $0.00?
A. No (probably). The cost basis, for the recipient of a gift, is the giver's cost basis (typically what they paid for it). However, the cost basis of "found" items is $0.
If you are in the business of acquiring and selling items, items picked up free from garage sales and the internet do have a basis (COGS) of $0.
Again, are you in the business of selling products (merchandise)?
just a private seller acquiring items and selling them
I understand but note the difference.
If this is a business, you would prepare a Schedule C and profit would be subject to self-employment tax (as well as ordinary income tax).
If this is a hobby, you would report the income as miscellaneous income, which is subject to ordinary income tax rates.
If the items are capital assets in your hands, then you would report the gain as capital gain which would be subject to tax at the capital gains rate.
Ok so It would be bussiness income then so I would file a secudle.c. and since I have no prof of purchase I would be better off putting 0.00 fir cogs?