Hobby

[Gary]

I have a client that sells guitars that he has collected over the years on E-Bay. He received a 1099=K for about $148,000. He said that his basis in the guitars was $125,000 but with the hugh E-Bay fees, Paypal fees, packaging fees, Fed=Ex fees, he had a large loss. He is retired and this is not a principal business so I treated it as a Hobby. Put income on line 21 and all expenses on Schedule A. Any thoughts.

[appelman]

Tier 2 miscellaneous deduction

And limited to the gross income. If he plans to continue this activity with expectation of profit down the line, you may want to reconsider the hobby classification.

[taxea]

I have a client that sells guitars that he has collected over the years on E-Bay. He received a 1099=K for about $148,000. He said that his basis in the guitars was $125,000 but with the hugh E-Bay fees, Paypal fees, packaging fees, Fed=Ex fees, he had a large loss. He is retired and this is not a principal business so I treated it as a Hobby. Put income on line 21 and all expenses on Schedule A. Any thoughts.

With that income and expenses I would have done a Sch C. He obviously intended to make a profit. Is he still selling on-line?
How much time did it take to sell the items? Will he be continuing to sell on line? As long as his intent is to make a profit (and he (did) I wouldn't consider this a hobby.

[Jiggers]

Putting that large amount on line 21 and the IRS doing a matching of the 1099-K forms, be prepared for the CP2000 or maybe even an audit.

This definitely goes on a Schedule C.

[Traveling EA]

Guitars

If these are guitars that have been collected over the years, are they considered to be collectables and therefore on D?

[oceanlovin'ea]

Traveling EA and taxea both gave my thoughts. First I thought since these are guitars he collects and is now selling on ebay, they would go on schedule D. But if he is going to continue to do this I would use Schedule C. Just because it is not his main occupation, doesn't mean it is a hobby. A lot of people have side businesses or second businesses. Most direct sales people have other jobs and they are put on Schedule C.

If he is going to continue to do this, I would put it on Schedule C. Don't think I would ever put it on line 21.

Linda, EA

[DonPriebe]

If these are guitars that have been collected over the years, are they considered to be collectables and therefore on D?

Don't confuse tax terms with the English language. From the IRS web site ...

Collectibles gain or loss. This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year.

[DexEA]

If these are guitars that have been collected over the years, are they considered to be collectables and therefore on D?

If he is selling off his collection this would be my first thought.

If he is continuing to buy and resell it would be different but just selling off your collectibles wouldn't be subject to SE.

[Kram BergGold]

Schedule D

I would have put these on Schedule D. If he never used them I may have treated as an investment and taken a loss. If he used them then I would not have allowed a loss. Collectible treatment is irrelevant as they were sold at a loss.

[Burke]

Don't confuse tax terms with the English language. From the IRS web site ...

I knew about the others, but alcoholic beverage?????

[Gretel]

I have no seen anything in the OP that even allows to give an opinion. There are so many facts and circumstances involved, has the taxpayer been asked about the profit motive and his future dealings?

[Traveling EA]

Guitar

A guitar could be an antique or a work of art. John Lennon's guitar he played when the Beatles played on the Ed Sullivan show in 1964 would be an antique in my book. The OP did not indicate what type of guitars were being collected.

[Gary2]

If these are guitars that have been collected over the years, are they considered to be collectables and therefore on D?

That's a red herring. The issue of whether or not they're collectibles is only relevant to the maximum tax rate on Sch. D. But the question as to whether they go on Sch. C or D has to do with whether they're inventory in a business or capital assets.

[Gary]

Two Questions

Doesn't the IRS look down on great losses on Schedule C?
I know they say losses for three out of five years. If I put it on Schedule D, what do with all the expenses?

[S T]

Guess you have to determine if "guitars" are collectibles according to the IRS definition ---If "collectibles" on Schedule D - higher cap gain tax rate - I believe - but would you not add the Ebay - sales costs to basis?

Not sure about the 1099K reporting - maybe on Schedule C and reverse to -0- with note transferred to Schedule D

Sandy