How to tax items from inheritance when I have no receipts? My mother has passed on A storage unit

[joe.sherm]

How to tax items from inheritance when I have no receipts? My mother has passed on A storage unit? Was planning on selling in Jan, I dont have A store nor very high feedback, like 700+ feedback for 6+ years. What I use to sell in A year most sellers sell in a week or month. 

[joe.sherm]

ohhh i guess I got 800+ feedback, sorry didnt realize that

[lacemaker3]

@joe.sherm 

When you sell things that you have inherited, the cost basis is calculated with what the IRS calls the "alternative" method: you need to make an estimate of the fair market value of the items at the time you inherited them. This is normally the date when the executor settles the estate. This is described in IRS Publication 551, Basis of Assets.

If you qualify to file income tax as a business seller, then you would report the income and associated expenses (including the cost basis and other costs of goods sold) on Schedule C. If you make a profit, then you can deduct all the expenses this way, and minimize the amount you have to pay income tax and self-employment tax on. 

If you don't qualify to file as a business seller, then you should report the income (whether a 1099 form was received or not), and the cost basis and other expenses on Form 8949 and Schedule D Capital Gains and Losses.

[cardsnmore2004]

Thanks for info on that. However I do have a question. How does the IRS know that certain items were inherited? So does that basically apply to any item that you don't have a receipt for.  I'm just curious since we have all these changes coming in 2022. I have always filled my Ebay income but didn't know of the alternative Method.   Thanks

[m60driver]

---

@lacemaker3 wrote:

@joe.sherm 

When you sell things that you have inherited, the cost basis is calculated with what the IRS calls the "alternative" method: you need to make an estimate of the fair market value of the items at the time you inherited them. This is normally the date when the executor settles the estate. This is described in IRS Publication 551, Basis of Assets.

---

Basically what this means is that your cost basis is what the item sells for as that is the fair market value unless you wait a long time to sell the item after inheritance.

[jayjaspersgarage]

"Basically what this means is that your cost basis is what the item sells for as that is the fair market value unless you wait a long time to sell the item after inheritance."

Yes, it gets complicated when you sell things you inherited 50 years ago, 26 years ago, and a whole pile five years ago.  

[dbfolks166mt]

     I am not sure what the storage unit contains but if it is a large volume of various items you may want to look at alternatives other than eBay for selling these items especially if some of them are large, fragile or high dollar value. An estate sale company or a consignment auction house may be a better option. 

     You may want to do a cost analysis to see what the difference in fees are across different venues but also consider that with an estate sale company or a consignment auction house you avoid a couple of things associated with eBay like the shipping, returns, scams, damaged merchandise, etc. 

[femmefan1946]

How does the IRS know that certain items were inherited? So does that basically apply to any item that you don't have a receipt for.

You are asked to cross your heart and point to heaven.

Basically, they take your word for it unless there is something that is very suspicious looking.

But you did lose your mother, that's documented.

You are the heir, that's documented.

You are selling at fair market value, that's documented.

And when goods are used, the value is much lower than the purchase price in any case.

Hmmm. I understand that Americans get tax deductions for charitable donations in kind. Keep track of the hard to sell/ship stuff that you give to Sally Ann or Vinnie or GoodHunting.

[keraz-0]

I assume that you have looked in this storage unit? If so, is there some high dollar value here?

If so, I would consider contacting a local auctioneer to come look at it and possibly sell it for you.

Many auctioneers are selling online only now because of covid. And people are buying competition is fierce.

[lacemaker3]

---

@cardsnmore2004 wrote:

Thanks for info on that. However I do have a question. How does the IRS know that certain items were inherited? So does that basically apply to any item that you don't have a receipt for.  I'm just curious since we have all these changes coming in 2022. I have always filled my Ebay income but didn't know of the alternative Method.   Thanks

---

@cardsnmore2004 ,

You need to read the IRS publications that I mentioned to get details.

Yes, you can use the alternative method if you don't have receipts or records to document that actual costs. However, if you are filing as a business (Schedule C), then a business would be expected to have receipts and records available, so it would be best to use receipts as much as possible.

If you are filing as capital gains and losses (Schedule D) then probably using the alternative method is more common than when filing as a business.

The bottom line, is that if you get audited, then the IRS provides written guidance for their auditors about how things should be valued, and the auditor's decision is final. Whatever method you use to document the cost basis, you have to be able to persuade the IRS auditor that your method was reasonable. Be sure to keep all the records from the searches that you do to establish the fair market value, because you may need to provide the evidence.

[tryno2]

Was the storage unit contents included in a probate filing?  If so, use the value shown for probate and you should be fine. 

[this*old*attic]

Some inheritance amount bears no tax. It’s tax free. Not sure what this year’s threshold is.

If the storage space has quality items you could always have everything appraised, both to check your own tax liability and to establish a baseline for the items.

If it’s ordinary household stuff, I’d take pics of batches at a time and assign my own values based on thrift prices.

One more wrinkle - if you’re a business you can deduct costs and expenses, if this is a one-off to get rid of items then it’s straight up income with no deductions allowed.

I wouldn’t overly stress. The IRS has bigger and easier fish to fry - you’re unlikely to run into problems if you make an honest effort.

[tryno2]

"Some inheritance amount bears no tax. It’s tax free. Not sure what this year’s threshold is."  You are correct and incorrect.  Some inheritance comes to you tax exempt BUT if you sell it, then you have to claim it as income (less whatever fair market value is assigned to the item"

[donnasfinds]

There is so much mis-informarion in this thread...it's quite comical.  Basically, you value inherited property on the date of death of the dearly departed. If you sell the item short-term after their death, the cost basis is essentially what you sold it for, so there's no gain and nothing to report.  If you wait some time before selling it, and the value truly goes up (from the time they passed to the time you sold the item), then yes, there's a gain and you have to report it.

Be very careful with what you take from this thread, because there's a lot incorrect statements being made.

[kh-stanley1]

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.