Subject:
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Re: When a hobby becomes a business, cost basis, income taxes, etc.
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Newsgroups:
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lugnet.market.theory
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Date:
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Sat, 30 Sep 2000 03:18:07 GMT
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Viewed:
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662 times
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Ben,
You raised some good points and I knew I remembered some details from the
classes I took back in the high school (don't ask). Publication 17 from the
IRS details that you are allowed to deduct your hobby expenses up to the
amount of hobby income. The idea being a hobby is not intended to make
profit. If you loose money in the process you can not deduct your losses
beyond your profits. i.e. a hobby can't be a source of off-set against your
income. If it were a business you could take a loss for about five years
before the IRS goes off the deep end. There is a separate publication that
deals with hobbies and I can't find the number. If you go to the IRS webb
site I am sure you can find it.
In the District you must obtain a tax ID number to operate aa business and
decide how you are going to set your business up. We are now moving toward a
master business license that will require anyone making more than $2,500 a
year to obtain a license. This will require all the side line buinesses from
basements to start documenting their income. This was modeled on the program
from the state of Washington, and other cities.
The copy of publication 17 I had here is a little aged and there are a few
more recent changes that may make a difference including the requirement that
you reach a certain percentage of your gross income before being able to take
deductions.
I hope this helps or points you in the right direction.
In lugnet.market.buy-sell-trade, Ben Gatrelle writes:
> Posted to .buy-sell-trade and .auctions, FU set to market.theory
>
> I notice that the trend is definitely toward selling parts rather than sets.
> In the past I have sold, mostly on eBay, mostly complete sets. I have
> purchased a selection of sets on clearance recently and have been planning on
> parting them out for sale on brickbay. I used to very carefully keep track of
> the cost and quantity of every set I bought. Some months the profit from the
> sets I sold would cover the cost of the sets I've kept. Other months I would
> spend a whole lot more than I made from sales. Other months I would actually
> make more than I purchased and kept. I think a lot of people auction and sell
> their sets and parts to offset the ones they keep for themselves. No new news
> here. My question is about turning this "hobby" into a business.
>
> If I buy a 100 piece set for $10 keep five or ten pieces, sell the rest of the
> pieces for $15, do I say I made a profit of $5 (assuming no auctioning fees,
> etc.). Do I need to adjust the cost figure for the pieces I kept? I'm not even
> sure how to ask the questions in my mind.
>
> I guess what it comes down to is does anyone know how much money you
> can "make" at a hobby before the IRS requires you to claim it as income? Or
> conversely if you say this is a business and you are trying to make a profit,
> what do you do about the pieces and/or sets you keep? Do you include this as a
> Research and development cost? I guess I need to talk to a CPA or bookkeeper
> about what I can and cannot do if I want to jump into this selling thing with
> both feet, or just one foot.
>
> This is too long already so...
> Any comments would be appreciated
>
> BEN GATRELLE
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Message is in Reply To:
 | | When a hobby becomes a business, cost basis, income taxes, etc.
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| Posted to .buy-sell-trade and .auctions, FU set to market.theory I notice that the trend is definitely toward selling parts rather than sets. In the past I have sold, mostly on eBay, mostly complete sets. I have purchased a selection of sets on (...) (24 years ago, 29-Sep-00, to lugnet.market.buy-sell-trade, lugnet.market.auction, lugnet.market.theory)
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