Filing Taxes - Sold Friend's large collection for him for a small fee

[mrorange4822]

Hi,

I'm getting ready to file my 2020 taxes. This fall I sold my friend's very large and expensive gaming collection and I took a small commission (I've done this in the past, and had to file, but not with such a large amount of gross sales and relatively small profit margin). 

Anybody do anything similar and what is your experience filing? All the money that he made, I sent back to him via PayPal so there is a paper trail. Do I consider that amount the 'Inventory' when filing? as I think this would be considered more of a service. I'll probably go to a tax professional - but hoping to get some feedback from the community.

Thank you very much,

Aaron

[carolynnq]

I'm not a CPA, so take my advice with a grain of salt. If you paid him $600 or more, you're supposed to send him a 1099. Whether you do or not, you report all of the sales as income, but then you deduct the amount you paid him from your sales. On Schedule C, I think I deduct it as commissions.

[lamber9347]

@mrorange4822 I've been selling items for my friends for a few years now. I keep my records on an excel sheet, each person separate and everything documented. You need records of the sales and exactly how much you kept from each sale. Print out your excel sheets and PP records to keep them all together. Having documentation of each transaction is what works on your behalf. Make sure you present all of your records to the person who finishes your taxes. Best of luck to you....

[jayjaspersgarage]

Back when I started selling on ebay I sold quite a bit for other people.  It's a tricky thing IF you get audited.  If not I don't think it is complicated.

I set up my agreements depending on the type of items.  If it was coins I would take 10% off the top, literally picking ten percent of the coins from the collection as my "handling fee".  The coins that sold I kept 35% of the net profit and paid them 65% based on the printed sales record of each transaction.  Almost always the result was better than if the ghost seller walked into a local coin shop and sold the whole lot for cash.

I don't bother selling for other people anymore. Oh my.  Silver is almost up to $30 an ounce.  Gotta go.........

[mrorange4822]

Nice. I have every item on my Excel sheet and it's very organized.  I think I'll be fine, it's just a significant amount of money compared to my small commission. 

Thank you very much,

Aaron

[mrorange4822]

Yeah I paid him almost $80,000.  Commission does sound more accurate than Inventory. Thank you very much for the help. 

Aaron

[shipscript]

@mrorange4822 

I had a similarly pricey deal with real estate. I handled the money from a relative, invested in a property, and returned the profit to them (minus my share for managing), after the property was built and flipped a year later. I did not give a name to my percentage as we were simply mutual stakeholders. I started with a signed, dated, hand written agreement that included their contribution or stake, and that stated the percentages we would split from the sale; and followed with a hand written statement of profit and the cash split afterwards. I was audited by the IRS. It went smoothly, as all was in order. They flagged the other account for inspection, but since the sale was already declared as income there, it was fine too. Honest and complete bookkeeping goes a long way when dealing in dealings.