posted on December 25, 2000 07:59:08 PM new
I have been reading the boards on inventory costs and how to track it for garage sales, etc., but can anyone tell me how they determine the cost of something they have owned for years and decided to sell on Ebay?
I am selling my personal record collection and have had some of these for over 40 years. I don't want to show them as all profit since I paid from $4 to $20 for these.
I will have total sales of nearly $15,000 this year as I also sell things I pick up at local auctions. That part is easy, but at least 1/3 of my sales has been generated from my own personal items.
I would appreciate any advice anyone could give me.
Thanks, and MERRY CHRISTMAS!
Linda
[ edited by lindajean on Dec 25, 2000 08:00 PM ]
posted on December 25, 2000 09:10:06 PM new
NO matter When you bought them no matter what you paid for them over the past 40 years they are yours you can say they have a $0 inventory value just like some one gave them to you.
you dont have to purchase them to sell you already own them these are personal Items I mean you could put a value on them if you want but it wont change much with out receipts your value wont mean much in a audit with the tax people.
But Once you sell them as far as taxes are concerned anything you make on them is all Profit in your books .
how ever once you file taxes add your write off and all cost to sell and so on most that profit will look like it never happened.
Your responses are some of the best I've viewed on this board regardless of topic. No hype, no histrionics, no baggage. And as for shipping hints, I wish I had the time and supplies to do everything you say you do.
'Tis the season and compliments are in order. There are other very compentent advisors, IMHO you're in the top ten.
posted on December 26, 2000 02:49:10 AM new
dman3, I just wanted to agree here. I always look forward to reading your opinion. I might not agree with it, I might think it is a little lengthy at times, but I still value it. Thank you for taking the time to share with us.
posted on December 26, 2000 05:15:20 AM new
Whatever you PAID for them is the cost, regardless of how long ago.
It's not difficult to attach a price to records ... just check newspapers from that era and see what the average prices are in the ads. The IRS will take a reasonable estimate, IF you can explain how you arrived at it. IF the records have a price on the cover, use it.
posted on December 26, 2000 08:31:08 AM new
When you begin this year, carry a little ledger with you wherever you go. If you drive 10 miles to a garage sale, record it. if you buy new ink for your printer, record. The same with meals bought while attending flea markets, stamps to mail payments, subscriptions to flea market papers, collectible magazines, phone calls, anything that is in anyway related to your business.
I think you will find that there are a lot more expenses than just Ebay fees and cost of stock. By keeping precise records, we have been able to really save a lot on our taxes. It's depressing to find out how little profit you actually make, but nice to save on what we owe Uncle Sam!
posted on December 26, 2000 01:34:52 PM new
Thanks for all the help. However, I certainly hope the $0 cost is not correct. I did pay for them, and I paid a lot!
dman: What did you mean by deducting my write-off? That is what I want to do, but the only way I can write it off is to establish a value? That was why I wanted to somehow place an inventory valuation on it. Since I didn't buy these at garage sales, I bought them new, there has to be some way to place a price on them that the IRS will accept.
I like the idea of looking in the newspapers of that time, and several do still have the original price tags on them. Most were around $6.95. Of course, I am only getting $3 to $5 for them so I don't want to look like I am trying to avoid taxes. I just want to be sure I don't get taken just because I paid for it long ago.
If someone "gave" them to me, I would agree. They would have cost me nothing. But I did pay and I paid a lot more than I pay for the daily items I pick up at garage sales.
I know I could ask an accountant, but I am an accountant and I do my own taxes. I have a degree in accounting and even a Master's Degree. It's just that I never ran across this particular case, and I can't find it in any of my tax research! I know I must be able to offset the receivable by some amount, I was just hoping someone had done the same thing and knew how their accountant handled their personal items they sell.
posted on December 26, 2000 03:25:54 PM new
lindajean -
If you bought a painting for $50 and sold it several years later for $6150, the IRS calculates your profit as (Sale price - purchase price). When the profit is negative, it's a loss.
The "writeoff" dman was referring to was the various expenses an eBay seller has.
posted on December 26, 2000 05:51:14 PM new
Yes the write offs I was talking about are the business write offs for your ebay sales.
Just a note I dont think the IRS will accept old new paper ads as receipts for inventory value.
The sale of personel item is 100% profit inless the money is all reinvested in a good tax shelter Like IRA, 401k,or use the income to buy a new home at the start of a year this will make the interest on the home loan a deduction and hopefully the income you would pay on you would nearly break even.
I believe I heard they are plaining on makeing money in saveings for education non taxable or decuctable something of that nature. http://www.Dman-N-Company.com
posted on December 26, 2000 06:43:41 PM new
Dman3: No Way
Your cost is the price you paid. Period.
Yes the IRS will accept a reasonable estimate. Zero is NOT a reasonable estimate.
The only IRS gotcha on Personal items is if you sell them at a loss, i.e. for less than you paid. Then this loss is not deductable. But if you buy something with the intent of selling it for a profit. But don't, the loss is deductable.
posted on December 26, 2000 07:37:03 PM new
Unknown
If you read my frist post in this thread you will see I said
"you could put a value on them if you want "
What I dont know is how you would prove this value.
I know every year when we go to our accountant to do taxes they want receipts on any dollar amount they are going to deal with over $25.00 as they will need to be there to exsplan this return in the event of an audit.
in the case of an estimated value I would need a receipt or writen apprasail stateing this estimated value or they would say to me well we are going to make this estimated value $25.00 or less wouldnt matter if I sold my records for $400 or $4000 even for donations our accountant wont allow more then $25 for donations with out receipts in front of them to prove it.
same with gambleing debts if I want to claim $1000 in gableing debts say on loseing loto or lotery tickets I better have $1000 in loseing tickets there to show.
maybe some accountants are tougher and more rigded then others.
posted on December 27, 2000 12:08:51 AM new
What your saying is true if you are selling a personal item, but When you 1st start out if you place all the personal items you wanted to sell into your business inventory the value is what it is worth the day you put it in. It doesn't matter what you paid for it. The IRS does not require you to include prior appreciation gains. But it to be reasonable. Its part of your starting inventory, after that anything you buy you must show what you paid for it. If you decide later to sell a personal item you will not be able to estimate a value. This is why all new dealers should set up their inventory before they start. You need to determine values for anything you can depreciate such as your car or computer. A new dealer should see his accountant before they start.
posted on December 27, 2000 05:06:59 AM new
"in the case of an estimated value I would need a receipt or writen apprasail"
FYI - the IRS will take "contemporary documentation", such as newspapers and magazines, when the worth of something is hard to determine by usual methods. A friend had a tricky question involving estate jewelry, and the IRS accepted ads showing the retail price as proof of the original cost.
posted on December 27, 2000 07:05:35 AM new
Perhaps the IRS is not as unreasonable as your accounted suggests.
But with Charitable deductions I think receipts are required because it is reasonable to believe that you didn't donate anything at all. [However, I've read that you can take a deduction equal to the average charitable dedction claimed for your income group in the previous year. That won't hold up in an audit, but it won't trigger an audit either]
But if you sold an item it is not reasonable to assume that you aquired that item for zero cost. IRS publications do have some language on estimating these costs, and as long as a reasonable basis is used, that a reasonable person would believe, then you are on pretty solid ground. IRS auditors are not unreasonable people.
