How do I report the sale of a gifted item on federal taxes? We received an old rifle (not sure antique?) from a family member as a gift, and sold it within a year.

Your cost basis would be your relative's basis (probably the original purchase price) if the basis is equal to or more than the current value of the gun. I assume that is the case if it might have been an antique. In other words, if you sold for a profit, use your relative's cost.

If the gun was worth less than your relative's basis—and you sold at a loss—then use the FMV. However losses are not deductible on sales of personal property.

The loan complicates things. If the gun was repayment of the loan, the donor sold you the gun for the loan amount, so that would be your basis.

The IRS has a more complete explanation at What is the basis of property received as a gift?

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I agree with @ErnieS0, except that your relative's basis would likely be the fair market value on the date of death of the decedent from whom your relative inherited the rifle.

Thank you for your reply! So would we report this through a 1099-S?

No. 

As this is an antique, it's characterized as a collectible, and should be entered in TurboTax as such.  See Line 18 in the 2020 Instructions for Schedule D for more information.

To enter it into TurboTax Online, 

1. Click the Pick up where you left off button, if it’s present
2. Click the Income & Expenses tab at the top
3. Click Add next to Stocks, Mutual Funds, Bonds, Other
4. Click the Add sale button
5. On the OK, what type of investments did you sell? page, click Other and Continue
6. On the Tell us more about this sale page, enter None in the Name box, then click Continue
7. On the Now we’ll walk you through entering your sale details page, for the question What type of investment did you sell? page, select Collectible in the dropdown.  For the question How did you receive this investment?, select I received it as a gift
8. Answer the remaining questions appropriately.

Thanks-

So just for clarification, if we received this gun as a repayment for a loan from the relative, we would still put "I received it as a gift"? 

Additionally, what would the cost basis be?  The relative we received the gun from had inherited it from his father when his father passed away. Would the cost basis be the price of the gun at the time that his father passed away? Or would the cost basis be the price of the loan? 

On the page "Now we'll walk you through entering your sale details", there's a section that asks to put the Date acquired by previous owner.  Would this be the date we acquired it, or the date that relative we received the gun from acquired it? I believe the relative we received the gun from inherited it when his father passed away. I'm assuming the latter? 

Thanks for your time.

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@n_m_s wrote:

.....Or would the cost basis be the price of the loan? 

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The cost basis would be the balance of the loan provided it was a reasonable amount to accept for repayment of the balance and an arm's length transaction.

Okay. Sorry I have so many questions. We didn't draft any paperwork or sign anything stating it was a loan.  I believe we lent somewhere around $3,000, and sold the rifle for $1,100.  We didn't really come up with a repayment plan, and I don't think we're expecting to enforce or demand repayment.  Would this then just be considered a gift? I was reading up on arms length transactions, and don't think this would qualify as one. @Anonymous_ @ErnieS0 @JohnW152