1099K Merchant Card & Third Party Network Payments

[zeros]

Client is a student but came in with a 1099K for $20K. This is merchandise that he has accumulated by gift and purchase for his own use. He now disposed of it on the internet and is not actually "in business" of selling for profit. I assume that he would have to report the $20K amount because its on the 1099K. His cost is more than he sold it for. I am assuming that he cannot take a loss of this? Need some advice.

[Koss]

Personal Use Property

You are correct that he can't take a loss.

He does not need to file a Schedule C, because the stuff wasn't sold in a trade or business.

Even if he was in business, IRS instructions tell us to disregard the section of Schedule C that deals with amounts reported on 1099-K. So I wouldn't worry about an IRS notice.

The sale should probably be reported on Schedule D. The stuff he sold was capital assets. But the loss is nondeductible.

I think you report the sales price, and the basis, but then put a zero in the column for gain or loss. But the procedure might have changed with those new forms associated with Schedule D. I'd have to look it up. Check the instructions for Schedule D.

The fact that he received a 1099-K is a distraction. With or without the 1099-K, the question is:

How do you report sales of personal use property when there is a nondeductible loss?

For most people, the answer is: You don't.

Because no one ever thinks about this. Do you ask every client if they sold stuff at a garage sale, or through a consignment shop?

Most of those sales should probably be reported. This one is no different.

BMK

[Y2KEA]

I agree with Koss. Put it on schedule D. My software has a box to check for "personal loss" so there is no need to overide the gain/loss column.

[BHoffman]

http://www.accountingtoday.com/news/IRS-Reconciling-1099K-Reports-Credit-Card-Payments-Gross-Receipts-61708-1.html

The above article seems to indicate that businesses will not have to reconcile form 1099-K with gross revenues either now or in the future.

[taxmom34]

because poster said client was a student, i'm assuming a young person, selling $20,000 on ebay, i'm thinking some kind of collectibles? heck even if i were to sell my furniture i don't think i would get $20,000. so, would it be possible that client sold one or two items at a gain? and would be advisable to use schedule D.

[Jesse]

http://www.accountingtoday.com/news/...s-61708-1.html

The above article seems to indicate that businesses will not have to reconcile form 1099-K with gross revenues either now or in the future.

Ya Hoo!!!!!

[Gary2]

because poster said client was a student, i'm assuming a young person, selling $20,000 on ebay, i'm thinking some kind of collectibles? heck even if i were to sell my furniture i don't think i would get $20,000. so, would it be possible that client sold one or two items at a gain? and would be advisable to use schedule D.

Either that, or he really is running a business, buying items at garage sales and selling them online. At least, that's what the IRS or state tax authorities may suspect. Now there are people who buy the latest gadget, use it for three months, then sell it to buy the next latest gadget. So I suppose that could add up to $20K and still be neither business nor profit. But it's worth asking about the real facts.