Determining loss or profit on used parts?

[Ky14]

I am planning to sell a lot of parts that came of my motorcycle build. I am going to keep track of every item I sell, some are easy to determine if it is a loss or profit like parts that I actually bought then never used. But how do I go about parts that I am replacing/upgrading? For example I have a headlight assembly that came of the bike and was replaced with something else. Do I compare it to the price of the bike when it was bought or the total worth of the bike after rebuild or to the aftermarket part? In my view it is just a reimbursement of the whole project that covers a fraction of it, what would IRS think?

[Vanessa A]

You would compare it to the price of the bike when you bought it.  Your actual investment  price is the cost of the bike.  Then you would need to determine what the price of the parts that you are selling would actually have been in relation to the bike.  You can use any reasonable method to determine this cost. For example, if the original headlight assembly would have cost $200 when you bought it, then you would enter $200 as the cost or if the cost of a headlight assembly compared to the cost of the bike is 10% of the bike cost, then you would enter 10% of the bike cost as the cost basis of the headlight assembly.

You would not compare it to the rebuild price or the aftermarket price because the rebuild price of your bike, should increase due to the aftermarket price. 

It would not be a reimbursement of the whole project in the eyes of the IRS, it would be based on your original cost. But in the end, if your cost basis is less than you sold it for, it will not be taxable although you would still need to include this on your return.  

Cost Basis: Tracking Your Tax Basis