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Old 03-02-2011, 04:01 PM   #88 (permalink)
raiderguy10's Avatar
Join Date: Sep 2009
Location: Bismarck, ND
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Originally Posted by momosgarage View Post
How would one go about doing that? In my experience dog breeders run into this all the time. They have an EIN, paperwork, noted expenses, recipts, etc and IRS says "no write off, this is a hobby". Seems to me the IRS would skew this in thier favor during an audit and say most of the time that ebay is a hobby, so no deductions. My guess would be that infrequent, high dolar ebay sellers are in the same boat as high dollar, infrequent dog breeders.

Plus, you didn't address the State vs Federal issue with losses, where one entity says, yes you can deduct losses, yet the other says, no you can't decuct.
As I eluded to earlier, simply having an EIN doesn't qualify you as being a business. There are a number of factors that get considered when you determine a business/hobby. There is no black and white; it's a case by case scenario. For most here, they have a PC of sports cards/memorabilia and they also buy/sell a lot as well. It's going to be pretty hard to pass it off as a business if the IRS comes to your house and you have autographed jerseys all over the place; EIN or no EIN.

There also is nothing to address on the State side. I can't speak on behalf of states as each has their own tax code. The starting point is always the same - taxable income at the federal level. They each have a series of adjustments to make from that starting point to arrive at state taxable income. I'm not up to speed on the 50 different states' tax codes - and there are 9 states that don't even have an income tax. I guess for the state question you need to consult a CPA in your state to ask about their specific adjustments.
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