@anvilring wrote:
No, I'm the sole heir; so the entire inheritance is not subject to income tax as it's under 5 mil. I'm quite familiar w/1099s but I'm just wondering how/what I'll need to provide other than a death cert. to prove I don't owe taxes on these ebay sales associated w/my mom's estate.
I'm sorry, but you're misunderstanding your situation. You have mixed up two different kinds of taxes; estate tax and income tax. (But, you probably won't owe any income tax on your sales, although you do need to report them correctly.)
Estate tax:
When your mother died, there might have been estate tax on your inheritance; however, you stated that it was less than $5 million. That is less than the threshold for owing estate tax (which was $5 million in 2011, and has been raised to $11.7 million for 2021). That means that you didn't owe any estate tax on the inheritance last year, on your 2021 tax return.
Income tax:
Now, your inheritance belongs to you, and you are selling it online. To assess your income tax liability, you will need to file the Capital Gains and Losses on IRS Schedule D. To calculate the income that will be reported, you take the amount you received for your online sales, and subtract your cost-basis for the items that were sold, on the forms that go with the Schedule D. There may be some other expenses, like eBay fees and shipping costs, that can also be subtracted.
For inherited items, your cost-basis is the fair market value of the items at the time you inherited them. Since that was just last year, your accountant will probably be able to use the amount they were sold for as the cost-basis, which means that you will be reporting a capital loss, not a capital gain. (I think this is what you are thinking of when you said "... the items are inherited and thus marked to market?".)
If you keep the items for a year or less, then you can't deduct any of the capital loss you incurred. If you keep the items for more than a year, you would be able to use up to $3,000 of capital loss to reduce your overall tax owing on your other income. Speak to your accountant or tax professional if you more questions about this.
Here's a good explanation of the 4 situations that online sellers may be in when they file their taxes (whether they receive a 1099-K or not). You would be in the 3rd case described here; an Investor.
https://www.nolo.com/legal-encyclopedia/taxes-when-you-sell-things-online.html
You definitely need to consult a tax professional who is familiar with collectors, capital gains/losses, and online sales, to make sure that your taxes are filed correctly.
If you try to write-off your online-sales income as "estate tax" (as suggested in the post marked as the solution to this thread) that would be incorrect, and would greatly increase the chances that you would be audited, and the deduction would not be allowed.
