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Old 03-02-2011, 02:32 PM   #83 (permalink)
momosgarage
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Join Date: Feb 2011
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Quote:
Originally Posted by momosgarage View Post
Umm...OK

Let me paraphrase his points for you (this was not my original post, but was something I also thought of) and yes I understand how taxes are paid on "profits".

point 1 - if someone sells $20,000+ worth of household goods "at a loss" over the course of a year and is not a regular seller on ebay (basically a one time big 'monty hall' sale). What do they need to do? Considering that they likely will not have recipts for said $20,000+ worth of stuff accumulated over a lifetime. Do they pay taxes on items they took a loss on and were used, just because they hit the 1099 threshold?

point 2 - just because the federal government doesn't say you owe taxes due to losses, does not mean the state will accept the same conclusion. So, once again a person sells $20,000+ worth of household goods "at a loss" over the course of a year, but despite not owing federal taxes they can possibly still owe state taxes simply beacause the state says so.

What is a person to do in these to above scenarios? Since in the above cases it will not be someone running a business, even as a sole proprietor. I say this because selling a pile of stuff one year on ebay that was sitting in your house, does not meet the IRS's checklist for what constitutes a business.



That was the point of the gambling losses example. The IRS can say you owe just on your $2000 profit, but the State can say different, even with proof of what the IRS said. Also who says the IRS won't want taxes for the whole $20,000. What proof do you have otherwise if audited? You won't have a shoebox full of recipts to prove the original cost of the items.



This also doesn't address the IRS discounting write-off's for losses by simply saying ebay is a "hobby" and not a business. Hence the: "IRS's checklist for what constitutes a business"
Any thoughts on the above?
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