Providing eBay Capital Gain and Capital Loss Information to the IRS

[articulatedgeared01]

Fri 2-14-2025 7:24 p.m.

I have never received a Form 1099-K from eBay.   However, the IRS indicates that eBay sellers are still responsible for reporting capital gains even if those gains were below the threshold value of $5,000 for 2024 (Reference: IRS documentation published in November 2024).  I was below the threshold value of $5,000 for 2024 and any capital loss CANNOT be declared as a loss.  It is declared as a "zero loss."  The threshold for 2025 is $2500 and the threshold for 2026 is $600 unless something changes (same November 2024 reference).  I worked through the capital gain issues for 2024 because I know I am going to clobbered in 2025.   

Computing a capital gain or capital loss requires (without a Form 1099-K and below  $5,000 threshold) requires knowledge of when an item was purchased, when an item was sold, the cost of an item (plus any additional labor / material / parts cost that "improve" an item or other allowable costs) and what the item sold for on ebay (that is, order earnings). 

Now that is all well and good if you are an accounting bug.  However, what do you do in a situation where you have been collecting items for decades and have no records (except in your head)?  Or you purchased a lot / bunch / grouping of "stuff" (items in good condition along with distressed items) at a garage sale, collectibles show, etc. 10 years ago?  How do you break out a "cost" for each individual item?  You need that "cost" to compute a capital gain or capital loss.   If the item has been repaired, etc.  that affects the cost too.  Because the item(s) was purchased 10 years ago, it is considered an item that is held "long term" and not "short term."

I have often wondered how much eBay sellers pay for items at garage sales, estate sales, collectible shows (that is, the original cost of an item before it is repaired and marketed).  Some dealers have told me that they pay 10 cents on the dollar for groupings of items.  It is pretty clear that the IRS knows because they have that information from eBay sellers who receive Form 1099-K's.   Once the information goes to the IRS, it would appear that the "cost" information is "public information" and should be available to the Public upon request.

I think it is appropriate for eBay sellers to provide that "cost" information to prospective eBay buyers.  

I think that the only way to avoid a capital gains-related or capital loss-related audit for eBay sales is to provide "accurate" (or estimated) information to eBay buyers as well as the IRS.

I imagine that eBay seller costs vary all over the spectrum in price.

IRS and US Customs personnel are not stupid.   They probably have a pretty good idea what items are worth.  What is lacking is a compilation / list of "cost information" for used items in good condition and items in distressed condition as well as the amount of time it takes to restore / recondition a used item.  Therefore, I am working up a list for used items that I have collected over a lengthy period of time.  I think I will begin including that "cost" information in my future eBay advertisements.   If the buyers think that I am "ripping them off," with my original cost or the repair / restoration time I put in, then they can always go to another seller.  I am also starting to make notes on how much time it takes to repair / restore an item.  It is frustrating when you realized that you are only paying yourself $1.00 an hour for repairs.   

Regards,

ag01     

and have no records.  

[slippinjimmy]

@articulatedgeared01 

If you are buying items with the intent to resell capital gains does not apply, any net profit you make is taxed as regular income.

If you are selling stuff that you collected over the years for personal enjoyment/use then you could incur a Capital Gain although in many cases you will have a Capital Loss.

If you lack documentation showing the exact amount you paid for these items then you will have to make a REASONABLE estimate of the original cost, the estimate would need to be seen by an auditor as believable as they can ignore your declaration and make their own (which will not be in your favor). That would be the value at time of acquisition not the current value.

-------------------

"IRS and US Customs personnel are not stupid."

That is debatable but one thing for sure US Customs are not relevant.

"I think I will begin including that "cost" information in my future eBay advertisements."

Why on earth would you do that and for what reason?

[pastimpressions]

If I am understanding the OP correctly (and someone please correct me if I err) they are suggesting that in the interest of fiscal transparency (aka to facilitate their own computation of tax liability) all sellers item costs information should be disclosed and available on this site to all potential buyers.

Insanity.

Insanity.

Dare I say, insanity?

When is the last time anyone went into any place of business B&M or online and asked the merchant:

"Oh, by the way, nice item. What was your wholesale cost?"

And...............got an answer and/or disclosure?

Oh, my stars.

Please someone tell me I misread and/or misunderstood something?

[articulatedgeared01]

Fri 2-14-2025 8:31 p.m.

1) I never bought items with the intent reselling them.   I was only interested in items that were part of a hobby.  Now the time has come to sell off some items that I have collected.   I still don't know what the IRS requirements are for "short term capital gains" (that is, items held for less than one year) and "long term capital gains" (that is, for items held for more than one year).  I need to do more research.

"...any net profit you make is taxed as regular income."  Does the net profit take into account labor for repairs / restoration and other costs for "individual items?"

2) When does declaring too many capital losses or too many high dollar losses trigger an audit by the IRS?

3) As I wrote, capital gains/losses can include the cost of "improvements" / other costs.

4) I am not going to discount the reality that IRS and US Customs personnel know what items are worth.   They have more records on more items and from more people that I ever expect to have.   They also understand issues of depreciation and devaluation.  Did you ever watch the movie, "Airport" with Dean Martin acting as a pilot and another actor who played a Customs agent? 

5) I think it is appropriate to include costs for items in eBay advertisements because it builds transparency and credibility - nothing to hide.  I would like to think that a 100% rating on eBay has some validity.

Regards,

ag01

[caldreamer]

IRS requires that you report "gross income" and then deduct "business expenses".     You must file as a business if want to deduct "business expenses" (cost of goods, EBAY fees, packing supplies, mileage).    You cannot deduct for your time/labor of restoring items.  

EBAY has "easy to read" 1-page report that shows YTD totals for (orders, refunds, EBAY fees, shipping expense).   Go to PAYMENTS, REPORTS (select LAST YEAR).

GROSS INCOME (this is amount you show on tax return)

-Refunds

-EBAY fees

-Shipping expense

-Other expense (cost of goods, mileage, packing supplies, office supplies)

NET TAXABLE INCOME

[simba6]

Garage sale items can be hard to place a value on.  Some items are at least "safe" to resell like an old bowling ball or warped tennis racquet.  The dice starts to roll with things like used car seats and baby cribs.  You do sometimes hit gold finding a new in the box set of Jarts.    No not to be sold here.

The problem is most items are purchased in large lots. We buy up what is left over at the end of the sale.  Some of it goes right into the trash so that lowers the value of the rest.    Yea that Franklin Mint civil war chess set might have had some value if a rook was not missing.   But asking what we paid for a Gi Joe with kung-fu grip?  I will never tell.

[pastimpressions]

@simba6 wrote: " But asking what we paid for a Gi Joe with kung-fu grip?  I will never tell."

🤣🤣🤣🤣

[krazzykats]

I will use donation value guides when estimating cost of older items when I can't remember what they cost originally.  Then deduct my expenses from the total.

The Salvation Army Thrift Stores | Donation Valuation Guide

There are other valuation guides out there, I just prefer this one.  🤑

[johnrj1226]

You might want to use this  IRS link to see what they  say - https://www.irs.gov/faqs or consult with a  consult tax preparer.

[articulatedgeared01]

Sun 2-16-2025 8:09 p.m.

Thanks.  Not running a business for what I am selling - no help.

Regards,

ag01

[articulatedgeared01]

Sun 2-16-2025 8:13 p.m.

I am not dealing with garage sale issues and I not running a business to sell my personal items.   However, I am working with lots / bunches / groupings of items.   I tend to sort out the lot items I purchased by manufacturer.   This makes traceability difficult for IRS reporting (capital gain) issues.  I am currently unable to trace an item back to an original lot.  And, I don't quite know how to arrive at a "cost" for an individual item.  (Note: I also repaired and used some of the items.)  So, it becomes a guess (estimate).   If I purchased a bunch of items from a pawn shop 30 years ago and the pawn broker estimated the final bill based on $1.00 per item - fine.   However, what am I supposed to do if one of the items is worth $10 and I sell it for $15 on eBay?  I need to declare that the one item "cost" $10 and I need to downgrade the "cost" of the other items in the lot (maybe 73 cents each).   

I am preparing for now and far into the future.  There are "interesting?" things going on with the Federal Government these days.  I figured if I documented in my eBay ads what I paid (or estimated what I paid) for an item, then it might demonstrate that I am being "transparent" with my eBay customers and the IRS.  Besides, I typically provide very detailed information about what repairs I have made on the items I am selling.  I also work very hard on packaging.   I think that is the reason I am having success selling on eBay.  My customers appear to like how I do business.   I figure that my customers need to be treated like "King for a day" or "Queen for a day."

Regards,

ag01

If some of your items go in the trash, then I would think you have to "raise" no "lower" to value of the rest.

[articulatedgeared01]

Sun 2-16-2025 8:47 p.m.

Good approach.  I also use guides for items what I am selling.   In fact, I have included some of the guide information in my eBay ads.  However, I have some concerns about utilizing copyrighted information.   Therefore, I reference the source of the information.   The items I am selling are Used (Pre-owed or whatever kind of slickster babble you might want to use).  What I am currently working on is a lengthy cross reference (list) for a wide variety of items (costs, fair market values or FMV's and typical current selling information).  I am going to ship my list off to the IRS.  The price I am willing to pay for items on my list is typically about 10% to 15% less than what most eBay customers typically bid.  That explains why I have purchased less and less on eBay.

There are too many eBay sellers ("merchants") who are not very knowledgeable about what they are selling.  They also are not skilled in repairing / restoring some (many) items either.   In the long run, I hope that my eBay customers believe that I have some level of credibility.  That goes for the IRS too.   

Regards,

ag01

[articulatedgeared01]

Sun 2-16-2025 9:02 p.m.

Have already been in touch with the IRS.  Had to wait on the phone for an hour.

Have you heard, "Come back when you can't stay so long?"

However, thanks for your input.

Regards,

ag01