Cost basis

[dealmaster08]

Hello,

I sell used household items and new and used video games and collectibles.  The household items are almost always at a loss, but I do usually profit from the video game stuff.  Some of my items I got years and years ago, some new at retail, some new or used from Ebay or other sources.  Frankly I don't really keep any records for this stuff.  I know that I will have to start doing better at that with the 2022 reporting laws changing.

I don't really know that I can accurately come up with a cost basis for many of my items to calculate loss or profit.  Is good faith enough?  Would I potentially be asked for the IRS for receipts that I don't have?  How much did you pay for this game 8 years ago?  How much did you pay for this strategy guide 15 years ago?  If you don't have receipts would MSRP be good enough?

Thanks

[coastaltechsolution]

You can try and search for items/similar items online and try and make a guestimate 

As far as legal/Tax advice you're best option is to speak with a professional  

[vintage-camerastuff]

All you can do is make your best guess.   I would put cost of goods at 50 to 80 percent of the selling price.   Are you are selling your items lower or higher than the high MSRP ?   MSRP is a fabricated high price by the manufacturer.

[dnasilver]

I would just start keeping better records now. The IRS will be inundated with 1099's and already cannot handle what they have today. If your sales are under a 100K a year odds of being audited are slim at best. If that time came and you don't have records on an old item you bought for personal use, you can search out what the item was selling for in that approx year. Yes, it will take time, but odds are you are unnecessary worrying.

You might want to pay a CPA for an hour of advice on how to maintain good records and what you need to record for future taxes. They can tell what you can deduct based on what type of selling you do. The previous administration made major changes to deductions for part time and hobbyist sales.

[uncseniorsportsfan]

I used to have a consignment business so I treat personal used household items as consignments.  Since the item was used by me the original cost would not apply.     I treat 70% of the selling price as cost of good sold and write myself a check quarterly for consignments sold.  So if I sell a personal used household item for $10.00 plus shipping - my cost of goods sold  would be $7.00 even if I paid $5.00 or $50.00 for it originally.     The other $3.00 covers fees and profit.   That was the same arrangement I had with consignors except they got paid monthly. 

My revenue is split between Consignments, Resale Items, and Shipping Collected.   My expenses are Consignor Payments,  Resale Cost of Goods Sold, Shipping Expense, eBay/Paypal Fees, and Other. Has worked for me for 30 years.

[coolections]

It is no different then when you donate to Salvation Army or a thrift store. You calculate the "approximate" value (less depreciation) and that is your cost. You deduct that from your gains as taxes.

[puyallup0612]

Hopefully there will be better guidance from the IRS and/or tax experts.  My thoughts if the majority of your Ebay sales are collectibles I would list the 1099k amount as investment sales .  Then reduce that income with your costs.  The question is what costs can you attribute to the cost "Ordinary and necessary costs" 

The ebay fees, sales tax , supplies to ship, mileage to/from post office. Cost of obtaining collectibles all seem OK.  Can you deduct a portion of your internet bill, room dedicated to ebay items, and any other costs would be an interesting topic of discussion.  I'm hoping they change the amount at least to 10k - 600 dollars is ridiculous and will cause an enormous amount of confusion without proper guidance.

[downunder-61]

If a seller doesn't have a receipt or records to establish the cost basis of an item, they can use the Alternative method, which is an estimate of the fair market value at the time the item was acquired. This is described in IRS Publication 551: Basis of Assets

https://www.irs.gov/pub/irs-pdf/p551.pdf

A lot of small sellers are selling items they have inherited, and in this case, the Alternative method is always used to establish the cost basis. It's the fair market value at the time the estate was settled.

Thanks lacemaker3

[luckythewinner]

The short answer is that no one here can predict what an IRS auditor would accept as sufficient proof of your cost basis in the event that you are audited. If you do not have a receipt, you will always be taking a risk if you are just guessing and writing a number down. 

Generally speaking, MSRP is not "good enough". If it was, then everyone paying less than MSRP for their inventory would throw out their receipt and use MSRP to get a bigger deduction. 

It all comes down to what you guess an IRS revenue agent might consider acceptable, knowing that their default position is "no receipt, no deduction". 

[kaaawa2010]

How about this scenario.  Your stuff kept around from childhood includes a comic book you bought for a Dime in 1961 that you sell on ebay in 2022 for $1700.  You even have a photo of you with the comic book as a kid.  Is the cost basis $1699.90 minus selling expenses?

[patriciadellxps]

It sure does not seem right we are being taxed on selling our personal items when we already paid tax on that money.

This is truly rotten and that should be exempt.

[bonjourami]

You paid sales tax for the item. Now you declare your sales to Federal taxes..apples and oranges.

[kh-ornesh]

Hi everyone,

Due to the age of this thread, it has been closed to further replies. Please feel free to start a new thread HERE if you wish to continue to discuss this topic.

Thank you for understanding.