Hobby selling and 1099-K

[lesctag]

Interesting question when it comes to cost of goods sold for my hobby of autograph collecting.

Suppose I went to a golf tournament to get autographs of PGA golfers.  That was the sole intent of the trip.

Let's say that travel (700 miles), hotels (2 nights), tickets to the golf, all added up to $ 500.

I get lucky and get 2 autographs of Tiger Woods (not realistic but for discussions purposes only).

I guess that would be considered a cost basis of $ 250 per signature.

But I not a business and my hobby is to get autographs of all the PGA golfers.  The IRS is forcing me to think more like a business in consideration of a cost basis if I do in fact one day sell some items.

So I really get 25 autographs over 2 days.  I still assume the 2 Tiger Woods, but I get 18 signatures on the tournament flag (separate purchase),  3 magazine covers, and 2 golf balls signed.

So what would one do?  What can one do that please the IRS?

Claim a common basis - $ 20 per signature?      (large gains on the 2 Tiger Woods and losses on some others , i.e. - The tournament flag might be worth $ 120 with a cost of 18*$ 20 = $ 360 if a common flat basis).

Or do I somehow put a weighted estimated on each autograph equal to what they might be worth and have them sum to $ 500.00?   Profits would be considered from that estimated weighted average thereafter.

That would lead to less volatility with future losses and gains.

Interested in opinions or knowledge of what to do for a situation like this.

[luckythewinner]

---

@dbfolks166mt wrote:

You would be correct. The cost of the goods sold is what you paid for an item or the cost of the materials used to produce the item. Almost everything else falls into the expense category. 

---

And further, I do not believe that business expenses from past years can be "carried forward" to the current year. The hotels and travel from years ago (when you and your kids considered this to be a "hobby") cannot be magically converted to business expenses and deducted in the current year.  

I think the IRS would require amending the prior year's return for that. 

[lithonius]

I'm planning to file a Schedule C for 2022 because eBay is furnishing all of my info to the IRS. I *am* specifically selling on eBay to make money, and I purchase, collect, and resell many items specifically for the purpose of making a profit; that many of those items are also parallel to a hobby I enjoy (collecting and painting Warhammer 40,000 miniatures and then  playing the game) is little more than coincidental because it happens to be an area in which I have prodigious knowledge; i.e., I know what things are worth and what sells.

As a related example, I wanted to ask the opinion (and I know I should go to a tax expert for this) of the forum about COGS on "free" promo items.

If I go to a Games Workshop store and spend $100, they'll give me a promo challenge coin commemorating a hero from the fiction, a  famous campaign, military unit, faction, etc. This coin comes at no additional cost, but it cannot, by itself, be purchased. They are not for sale.

However, I know I can resell this coin to a collector who appreciates its value - a Space Marine, coin, for example, would appeal to someone who has a Space Marine army. If I can sell this coin to him for $30, what is my COGS?

a). It's zero, because the coin was a "free" promo item.

b). It's $30, because the item has no retail price and the market price is determined by what the purchaser will pay.

c). It's $100, because I had to spend $100 to acquire the coin.

d). None of the above.

I'm leaning toward 'b', but I have to admit I don't know ... surely someone else has dealt with something like this over the years?

[singular-source]

Good time to be a tax professional.  My old $600 phone puts me in the category of needing to hire an accountant...just a scenario.  Its absurd.

[singular-source]

If you keep detailed records and its obviously not a hobby.  Your good.  In my opinion, regardless of income.

[singular-source]

Cash transactions will go up a lot.  Get ready Facebook.

[nocoolnamejane]

---

@singular-source wrote:

Cash transactions will go up a lot.  Get ready Facebook.

---

Not so sure. 

Using your example above, there is NO WAY I would purchase an old $600 phone from a stranger on Facebook without the protection of a credit card/PayPal.

The sellers might try to take their business where no paper trail will be left, but that doesn’t mean the buyers will follow.