I have a client who sold his own clothes and other personal items on ebay for some spending money. He received a 1099-K from paypal for about $34,000 for the year for quite a few items. How should I handle? I am thinking on Schedule D. List each item or in total. The sale price is the sale price. The cost basis is what he paid for each item each separately or in total. The loss if any will be limited to $3,000. To me this is not a business and not a hobby so this is the only way left to handle. Thanks.
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Client sold his own clothes
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Originally posted by cipparulo12345 View PostThe loss if any will be limited to $3,000.
No, the loss is limited to $0. The sale of personal-use items is not a deduction.
However, $34,000 seems insanely high for selling personal items. You may want to get details to verify they actually were personal-use items, and not items bought for purposes of resale.
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Handle this very carefully because if you or taxpayer take the position that he received $34K selling used old clothes the IRS will make you prove that the basis of those clothes are mote than "Thrift Store" value that is used for charitable donations. I seriously doubt your client can come up with receipts to disprove that for the major part of the purchases.Taxes after all are the dues that we pay for the privileges of membership in an organized society. - FDR
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Add me to the list that doesn't think someone cleaning out closets would yield 34K at resale prices. What due diligence have you done to determine he is selling personal items he no longer wants and not going around places like Goodwill buying items for the purpose of selling them at a higher price on Ebay?
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If I do his return and I probably will not - I told him to provide a listing of everything he sold by item. The sell price and the purchase price. I found out he was in jail. He claims he sold his clothes, cuff links and watches for some spending money. He had consistent sales of $3,000 per month January-December of 2016. This is for 2016 in which he never filled. The IRS gets 1099-K sales so they caught up with him.
I agree with all of you this is a business. I believe that due to his criminal history he is adept at lying. Even if he comes up with details of the items he bought and sold which he will not I am going to pass on this one anyway.
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