Subject:
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Re: Taxes from Lego auctions?
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Newsgroups:
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lugnet.market.theory
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Date:
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Sat, 19 Feb 2000 16:25:13 GMT
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Reply-To:
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icestorm@inwave.STOPSPAMMERScom
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Viewed:
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643 times
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Will Middelaer wrote:
snip...
> You could, of course, write off legitimate costs and losses against your
> profits from these activities. You could not, however, use costs you incur
> towards the hobby side of legos against your business to make your selling
> look like a loss, and you could not use the costs( and "losses" ) against the
> income from your day job.
I apoligize for snipping any of Will's response, but in the interest of
brevity and management, it seemed necessary.
The question of taxes from sales may apply to individuals as well as
businesses, if the sale between two people, seller and winner, is within the
same state. I'm sure the congress or President will mess this up for the US
in the future, but for now the biggest tax concern would fall on a seller if
he sells to a winner who lives in the same state. I also don't think it
matters if the legos are sold at a profit or loss. A sales tax may be
automatic, and would be distinct from and profit/loss incurred to the
seller. I don't believe it is up to the state's Department of Revenue to
collect the tax, but the seller has the responsiblity to see the tax is
paid.
To lossen up discussion, let's say "A friend of a friend" has noticed that
there is money to be made selling and auctioning off legos. One possiblity
for this friend is to elevate the practice into a business. Lot of
interesting benefits. Write-offs could include travel if you buy original
legos from local stores, your computer/scanner/ISP if they are used for the
sale, and you could pay yourself an hourly rate for the time spent buying,
sorting, and selling. Records would have to be kept, and it would be a
nightmare for the non-accountants among us, but elevating selling into a
business would go a long way to making profits look like a loss. The friend
of a friend is certainly curious about the benefits of this, and any source
for information related to starting one's own business.
snip...
> This whole area truly gets gray when the process of parting out gets brought
> into the picture. If you part out a bunch of sets and sell the entire
> contents of the set, then you just look at the total amount of money coming in
> minus the total amount out. But, lets say you decide to keep some of the
> parts for your own projects, then ebay the rest, generating enough to cover
> all your costs and then some. Lets say, for example, you buy 8 8480's (Lets
> not mention names here.) to part out and decide to keep the turntables, motors
> and micro-motors for yourself, then figure you can ebay the rest, pay for your
> purchases and make enough profits to buy that 4558 for your own collection
> that you dreamed about since you emerged from your dark ages. (See Buy to Sell
> to Buy thread elsewhere.) How the heck do you figure the cost of what you
> bought in order to figure your profits. It might be hard for you to do, but
> if it came down to it, the IRS could name a reasonable figure then make you
> prove your own theory in place of theirs, and they are really good at
> analyzing businesses.
The friend of a friend has wondered about this part of it. A simple formula
of price divided by total pieces seems fair to arrive at a value of the
pieces that are withheld for personal use, but it's obvious that a micro
motor is worth more than a 1x1 plate. I've heard that some compensate for
piece value by counting studs. The formula would then be price divided by
the total number of studs among all the pieces, the the value of a piece is
determined by multiplying the number of studs on a piece by that number.
Helmets provide a hickup to this, and shape(a 1x8 brick seems to be valued
more than a 2x4 plate, especially if it's an "arch" brick) also makes a
difference. One more twist: make the arch orange and the plate blue. The
studs on the arch are going to bring a better price than the plate I'd bet.
The headache could multiple if, for tax purposes, the IRS would want you to
show the number of studs on the pieces sold to verify your claim.
The friend of my friend likes the first formula more. :)
> (This is far enough outside my area of practice I'm not sure how this all
> interacts with simply declaring this a hobby (some limits apply), whether or
> not this would be a capital gain (buying and selling an asset) or regular
> income from self employment (in which case you would be responsible for lots
> of paperwork, paying your medicare (both sides), paying your social security
> and worse still, paying a potentially higher tax rate than if it was a capital
> gain.) Really, if you have made enough to be worried about this than you
> should spend some time and/or money to secure competent tax advice, since I am
> out of my field here.)
I agree with seeing a professinal. Probably more than once. The upside to
all the expense is that it goes against any profits made. Lots of paperwork
and hassle, but the tax benefits may be worth it.
snip...
>
> There are a whole lot of other things to think about here like how does the
> governments announced intention to not tax the internet apply to small sellers
> on ebay, or "Would ebay really hand over my confidential records?" (This one
> is not as easy to answer as you might think, since ebay has a history of both
> folding like a cheap suitcase in the face of government pressure and at other
> times acting like they rule the world and they just could not be bothered to
> help anyone out.). Heck, maybe the IRS has been mirroring all the closing
> values on ebay so that they would not even have to bother getting the record
> on old transactions from ebay.
And the paranoid, conspiracy lovers among us know the rumors that the NSA
can read every e-mail sent over the net. :) Until I hear rumors that the IRS
is getting the same computer set-up as the NSA, I won't worry. Neither will
my friend's friend. :)
>
> There really is a lot of great debate topics presented in Dan's question, and
> I look forward to seeing what other people think about what Dan raises. • snip
>
> Will Middelaer
>
> (Please, no posts about how income taxes are illegal because the 16th
> amendment was never ratified or any of that stuff. We live within a system
> that isn't so bad compared with the rest of the world, so just relax.)
I looked forward to a debate to when I saw the topic, but was surprised with
just two responses. Will, if you're reading, I thought you made a great
response. I just wish more observations and experiences had been drawn out.
Mark
Maybe we need another newsgroup?
lugnet.market.starting-and-running-your-own-lego-business
lugnet.market.taxes-invloved-with-starting-and-running-your-own-lego-business
Just a thought. :)
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Message is in Reply To:
 | | Re: Taxes from Lego auctions?
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| (...) You can not claim the value of your own time against the transaction, but in the case listed above, you made no money so you have no income to claim. You simply sold something for the same amount that you bought it for, realizing no gain or (...) (25 years ago, 17-Dec-99, to lugnet.market.theory)
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