Hobby

[taxea]

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.

IMO using Sch D would required that the specific guitars had a historic or other type of raise in value...such as a rare Martin or had belonged to a Elvis, Johnny Cash, etc. If he was just wanting to downsize a collection of "no count" guitars then the Sch C is appropriate. We still haven't learned whether the TP is continuing his efforts, how long it took to sell them, whether he intended to make a profit, etc.

I don't think you would call this a hobby unless there was little gain, unintended profit, or no intention to sell the items. Collecting things is a hobby. When you start selling them that could be a different story. Even hobbiests who make things to sell call the sale of them a business.