How should I deduct cost of goods sold for gifted household items for eBay taxes?

Submitted by beckagrosst t3_zyglbm in personalfinance

I made several sales this year as I cleared out my apartment, and many sold items were not purchased by me originally, so I am unsure how to deduct cost of goods sold. I have a detailed spreadsheet with every sold item, and it's original purchase price and date. I also have screenshots of receipts for everything that was sold even if it was NOT purchased by me. (Most items were purchased by large retailers like Amazon or Newegg.)

For example:

  1. My brother buys me a laptop in 2018 for $1,000 using HIS credit card

  2. I use the laptop for 4 years

  3. I sell the laptop in 2022 for $750 and keep the money

Can I deduct the $1,000 cost of the laptop when purchased by my brother from the $750 of sales (-fees, shipping, etc) and show on my Schedule C that I did not make any money? Or because my brother made the original purchase 4 years ago instead of me, do I report this as a $750 profit because I never paid for the laptop in the first place?

Seeking some initial advice. I understand I need to contact a tax professional before final filing.

6

Comments

You must log in or register to comment.

Werewolfdad t1_j25pmtp wrote

Are these business assets or household items? Your choice of phrasing makes it difficult to tell

6

beckagrosst OP t1_j25pu5q wrote

I sold personal items (laptops, phones, clothes, etc.) that I used in my apartment. I sell as a hobby, but made a few thousand dollars in sales this year.

2

Werewolfdad t1_j25q31c wrote

You can’t deduct expenses for a hobby

So you just sold random stuff you owned? That doesn’t require any tax form let alone a business tax return

16

beckagrosst OP t1_j25qkjf wrote

eBay issues a 1099 for sales more than $600, which I have significantly gone over. I have to report this income to the IRS in 2022. My question is regarding how to determine cost basis for old gifted items that I have decided to sell.

2

Werewolfdad t1_j25qnj9 wrote

The 1099-k rules were delayed another year

And It’s not income

15

beckagrosst OP t1_j25r1o5 wrote

>As a result of this delay, which follows over a year of eBay Government Relations advocacy on behalf of the eBay community, only sellers who: 1) exceed the previous threshold of $20,000 and 200 transactions, 2) that were subject to backup withholding or, 3) whose states of residence have a lower reporting threshold will receive a Form 1099-K.

I am in a state whose reporting threshold is $600, so I think this still applies to me?

3

Werewolfdad t1_j25rhdm wrote

Your post is asking about federal rules and you didn’t include your state

Regardless, your cost basis in a gift is either the donors adjusted Basis or FMV, whichever is “worse” for you, so it doesn’t matter since you don’t have a gain

7

beckagrosst OP t1_j25rpnp wrote

I see. So basically I did not gain and therefore don't show a profit on this sale?

​

Edit: The state is VA

3

DeluxeXL t1_j25rpwy wrote

Generally, you "inherit" the cost basis from the gift donor. Read this caveat.

> 1. My brother buys me a laptop in 2018 for $1,000 using HIS credit card > 2. I use the laptop for 4 years > 3. I sell the laptop in 2022 for $750 and keep the money

Since donor's cost basis (step 1) and FMV at time of gifting (step 1) are identical, use $1,000 as the cost basis of your sale (step 3). Capital loss of personal use item is not deductible. Reporting is generally not required for selling personal items at a loss in a non-business setting.

If reporting is desired, on Form 8949, enter $750 as sale proceed, $1000 as cost basis, and $250 as adjustment (code L) so the subtotal is $0 (no taxable gain and no deductible loss).

Note: If you run a business, you cannot just turn your own personal-use item into a business inventory just so you can deduct it.

3

beckagrosst OP t1_j25tisc wrote

Thanks for this. I do NOT operate a business. To clarify, the items sold are items that I am getting rid of from my home, such as selling old clothes or old electronics. My brother gifted me the laptop for a birthday years ago, I used it for personal use (school etc), and sold it this year so that I could buy a new laptop. I never paid for the laptop, but I kept the money from the sale.

2

compounding t1_j273tr0 wrote

Ya, that’s fine. The cash from selling the item later is part of the gift your brother gave you as long as it didn’t appreciate in value since then.

He can give you up to $13k worth of gifts per year without any tax implications at all and just file some record keeping forms for up to millions after that.

2

[deleted] t1_j25s18n wrote

[deleted]

2

beckagrosst OP t1_j25t2i3 wrote

Everything sold was for personal use (laptops, earbuds, clothes, appliances, etc) and nothing was used for business. I think I confused Schedule C and Schedule D in my post.

​

>You cannot take a capital loss on personal property, so you’ll have to adjust the gain/loss to $0 for that sale on schedule D.

This was more my question: not can I factor in a loss, but is there any profit in the sale even if I never paid for the sold item originally. It sounds like it would be $0 then.

1

RascalRibs t1_j25pn7j wrote

Those sales were all profit for you. You had no cost basis.

−9

freddie_the_mercury t1_j25qs0i wrote

I disagree. when the laptop was gifted it had value. I believe when an item is gifted you inherit the giver's cost basis. I would use the $1000 as the cost basis.

4

beckagrosst OP t1_j25r6ow wrote

This is what I've heard too, but am unsure how to verify this.

1