Is selling on behalf on someone and them letting you keep the profit taxable or considered a gift?

[vb245]

Hello, 

I have a question because I sold some jewelry online on behalf of a family member I live with. I also sold some other stuff around the house that we no longer needed. The agreement was I could keep 100% of the profit that came from selling the jewelry. My question is since I'm not selling gifted property, but rather they are gifting me the money that comes from the profit I sold does it count as taxable? And if it is considered taxable would it be a capital gain? And if it was a capital gain, would it be considered a collectible? It wasn't really fancy jewelry, only Silpada so there would be .925 silver in it but no gold or really precious stones. 

[AbrahamT]

The same rule would apply a if it were gifted property that is sold. The reason being is that the family member technically gifted to you the property by allowing you to keep the profit from the sale of these gifts. The long term capital gain tax rate would go in effect from the date that the original owner purchaed these items. Collectibles have the same capital gain rules. The long term capital gains rate will depend on  your income threshold and filing status as follows:  

 Single

Up to $41,675    0%

$41,676 – $459,750  15%

Over $459,750   20% 

Married filing jointly

Up to $83,350    0%

$83,351 – $517,200    15%

Over $517,200    20%

Married filing separately

Up to $41,675     0%   

$41,676 – $258,600   15%

Over $258,600   20%

Head of household

Up to $55,800    0%

$55,801 – $488,500    15%

Over $488,500    20%

As per 

https://www.irs.gov/publications/p551#en_US_202212_publink1000257002

See this

[EDIT 1/25/2023 11:00 AM PST]

[vb245]

@AbrahamT Thank you so much for your answer! I'm a bit confused however as to if it would be a long term or short term capital gain. They held it for multiple years, but since I never technically "owned" it per se but only the proceeds from the profit of it would it be long term or short term. And would the cost basis be the cost they purchased it for?

[JulieS · Accepted solution]

Yes, the term would be short term (less than one year), because the gift is occurring at the same time as the sale. 

The cost basis depends on the price paid for the item, or its fair market value (FMV) at the time of the gift, and whether you have a gain or a loss when you sell of the property. 

Your basis for figuring gain is the same as the donor's adjusted basis (what they paid for it). Your basis for figuring loss is its FMV when you received the gift. 

For example, you sold the piece for $100. Your relative paid $150 for the item. The FMV is $100 at the time of the sale. You report the sale price of $100 and the cost basis of $100, so no gain or loss.

Or, you sold the piece for $100. Your relative paid $50 for the item. The FMV is $100 at the time of the sale. You report the sale price of $100 and the cost basis of $50, so you have a gain of $50. Click here for more detail. 

You can also add the cost of the sale to your basis.