I am a member of a program in which I am given goods (at no cost) in exchange for providing product reviews for those goods. The company sends me a 1099 for the fair market value of those goods, for me to report as taxable income.
Thus far this has seemed pretty straightforward. But what If I decide to resell those goods, as used items, once the required waiting period has elapsed? What are the tax implications of those sales?
As an example, say I receive a printer with a FMV of $100. That $100 counts as income and I pay income taxes on it. For the sake of argument, let’s say I pay $25 in income tax on that $100.
Later, I sell that used printer to a third party via a private sale, say for $50. How do I account for this $50 in income? Are there other implications I may not be aware of? Would I need to somehow arrange to collect state sales tax on the items sold? How would I record this activity in TurboTax?
The fact that you had to declare the value of the item as income means, for tax purposes, that you were not "given" the item. You effectively bought it with your own taxable "income". So, you treat it like any other used personal property that your later sold: report any profit as income; ignore any loss on the sale (a loss on the sale of personal use items is not deductible).
You do not account for the $50 since it is less than what you paid for it. If you sold it for $125 then you would have a profit of $25 that is taxable income. As long as you resell for less than you paid for it, there is no profit and is not reportable.
The fact that you had to declare the value of the item as income means, for tax purposes, that you were not "given" the item. You effectively bought it with your own taxable "income". So, you treat it like any other used personal property that your later sold: report any profit as income; ignore any loss on the sale (a loss on the sale of personal use items is not deductible).