Selling on Ebay

[Gary]

I have a client that sold musical instruments he had for many years. He is going to get a 1099 from PayPal for about $50,000. Since this is personal property, wouldn't any gains go on Schedule D? It's possible that their might not be any gains. What do you do with the large sum that will be on the PayPal 1099? He should not have to file a Schedule C, would he?

[Dusty2004]

I would enter on schedule D

I have a client that sold musical instruments he had for many years. He is going to get a 1099 from PayPal for about $50,000. Since this is personal property, wouldn't any gains go on Schedule D? It's possible that their might not be any gains. What do you do with the large sum that will be on the PayPal 1099? He should not have to file a Schedule C, would he?

I would make sure he documents what he sold - when he sold it - when he purchased it - what he paid for it - etc.

Sorry - I did not state - I would do on Schedule D if he is not in the business of selling these and it was a "one time" thing.

Dusty

[Questionguy101]

I have a client that sold musical instruments he had for many years. He is going to get a 1099 from PayPal for about $50,000. Since this is personal property, wouldn't any gains go on Schedule D? It's possible that their might not be any gains. What do you do with the large sum that will be on the PayPal 1099? He should not have to file a Schedule C, would he?

I think you have to seriously consider the requirement of a Schedule C if the selling is a continuous process.

[Kram BergGold]

Collectible

You should check to see if a musical instrument is a collectible subject to the 28% tax.

[Gary]

Thanks

for all your replies. I think these are just instruments that he has accumulated over the years and in now finally getting rid of them. It is not a continuing business. He might actually have a loss. My only concern was that the IRS might expect to see a schedule C since he is receiving a 1099-misc. This shows only how much he received, but how does the IRS know that it is from a sale, other than what I put on the return?

[Y2KEA]

PayPayl will issue a 1099K not the MISC. From the info given, it appears that he is selling personal property which should be reported on schedule D showing taxable gains & non-deductible losses.

That being said, will IRS question this & attempt to reclassify it as schedule C income? Who knows. Facts & circumstances wil govern the correct reporting. This is the can of worms which the new reporting requirements will open.

And as we all know, once you open a can of worms, it is impossible to put them back.

[taxea]

I agree with the first two posts. If this was a one time thing then Sch D. If he is in the habit of selling online, then I would do a Sch C.

[Gary2]

I agree with the first two posts. If this was a one time thing then Sch D. If he is in the habit of selling online, then I would do a Sch C.

I'd say if he's in the habit of making money by selling online, then a Sch C should be considered. If it's someone who routinely sells old stuff at a loss, but just happened to make a profit, it's still not a business.

[taxea]

I'd say if he's in the habit of making money by selling online, then a Sch C should be considered. If it's someone who routinely sells old stuff at a loss, but just happened to make a profit, it's still not a business.

I disagree. If he is in the habit of selling online consistantly and with the intention of making income then it is a business no matter what he calls it. Just because a business has a loss doesn't necessarily negate it as a business.

hobby vs business
Regulation Section 1.183-2(b)

[Gary2]

I disagree. If he is in the habit of selling online consistantly and with the intention of making income then it is a business no matter what he calls it. Just because a business has a loss doesn't necessarily negate it as a business.

hobby vs business
Regulation Section 1.183-2(b)

The regulation repeatedly uses the term profit, not income.

I'm not talking about an occasional loss, nor about people who go around collecting junk and selling at a profit on eBay. Rather, I'm talking about people who routinely clean house by selling old items, such as old computers, music players, books, etc. There's clearly an intent of making as much money as possible off of these, but it's also obvious that there's no intent of ever turning a profit.

[MilTaxEA]

Another option might to be to report the amount on line 21 and step it out (another line 21 entry but for a negative amount) by stating it is reported on Schedule D. This might help prevent a CP2000 from being generated since the IRS usually looks at Schedule C, E, and Line 21 for 1099-MISC match-ups.

[taxea]

The regulation repeatedly uses the term profit, not income.

I'm not talking about an occasional loss, nor about people who go around collecting junk and selling at a profit on eBay. Rather, I'm talking about people who routinely clean house by selling old items, such as old computers, music players, books, etc. There's clearly an intent of making as much money as possible off of these, but it's also obvious that there's no intent of ever turning a profit.

Sorry that was what I meant to say...profit

[ttbtaxes]

In order for there to be a business, and thus SE tax, the activity must be "regular and continuous". For example, if a neighbor asked me to paint his house and paid me $2,000, that amount would not be subject to SE tax if it was the only time I ever painted a house for remuneration.

[taxea]

In order for there to be a business, and thus SE tax, the activity must be "regular and continuous". For example, if a neighbor asked me to paint his house and paid me $2,000, that amount would not be subject to SE tax if it was the only time I ever painted a house for remuneration.

Yes this would be an example of the difference between reoorting the income on Line 21 and reporting it on a Sch C.

[DonPriebe]

Another option might to be to report the amount on line 21 and step it out (another line 21 entry but for a negative amount) by stating it is reported on Schedule D. This might help prevent a CP2000 from being generated since the IRS usually looks at Schedule C, E, and Line 21 for 1099-MISC match-ups.

As noted previously, he will not receive a 1099-MISC from PayPal, he will receive a 1099-K (if in fact he receives anything). And for 2011, the Schedule C instructions say to show -zero- on the 1099-K line even if you did receive such a form.