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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Fri, 17 Dec 1999 06:36:36 GMT
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In lugnet.market.theory, Dan Jezek writes:
> Should a Lego collector claim sets s/he sells on ebay or serious collector or
> anywhere else on their taxes? I don't see a point in doing that if let's say
> I buy some lego sets for 1,000 bucks, build a couple creations with them, then
> sell them for 1,000 bucks and use the money to buy other lego sets? There is
> no income here and the hours of labor put into disassembling, sorting,
> building and packaging the sets would come up to a loss, not profit.
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 income from the transaction.
Now, if you bought the sets for $400 total, then turned around and sold them
for $2000 total, then clearly you have some income(gain?) that should be
declared.
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.
By this I mean you could not buy, lets say 10 copies of a $100 set, keep and
build 6 of them for yourself and sell the other 4 for $150 each on ebay then
claim that you posted a $400 ((10x100)-(4x150)=400) loss. In fact, since the
four sets that you sold only cost $400, you actually generated a $200 profit
on this deal. The other six sets would not enter into it, typically, as the
tax man sees it, since they were not part of your business. Now, if you
somehow used the other sets to somehow promote your business...... (This
really starts to get off topic, and if you are seriously worried about these
things, see the end of my post.)
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.
> My biggest concern here is Ebay. They track the transactions people did
> there. Another thing would be RTL where noone gives a rat's what anybody does
> and is just like making a deal with someone on the street.
True, but the only part of the paper trail that ebay provides is how much you
paid them to conduct/host the/your auction (Wording chosen to avoid become
embroiled in that "States regulating online auction thread going on right
now.) and how much the winning bidder offered to pay. There is no proof of
how much they actually paid you, how much you had to pay for supplies for
packing and shipping the things that you sell, and most importantly how much
you paid for the things that you sold on ebay.
(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.)
Since the famed IANAL does not apply here, I'll go with YMMVBIAALBTINMAOP
(Your Mileage May Vary Because I Am A Lawyer But This Is Not My Area Of
Practice.)
> Any thoughts on this? If you would not feel comfortable replying here since
> the messages here are being logged then let's take it to e-mail. I'm
> interested to hear what other more experienced people have to say.
Why not feel comfortable discussing it here? This is still (at least for us
US residents) a free country, and talking about any darn thing we like is one
of the great freedoms of this country. (Follow ups on this part of my post to
off-topic.debate.)
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.
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.
My final words, for now, to US residents and taxpayers on this topic will be:
"We live in a great country that affords us many freedoms, maybe not as much
as it used to, and maybe not as much as it should, but it would not be worth
losing your freedom over a few bucks, and tax evasion is serious business. If
you make money off of your dealings of buying and selling on the internet,
under our current system you owe taxes on your profits(income) from these
activities, and it behooves you to get qualified tax advice from a tax
professional to aid you with your decision."
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.)
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Message has 3 Replies:
 | | Re: Taxes from Lego auctions?
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| (...) since (...) us (...) one (...) to (...) Key word here is "still." I get a little paranoid (in some weird cases, considerably) about forever etching my words on the net. There was a poll recently on AOL about gun control. With our somewhat (...) (25 years ago, 17-Dec-99, to lugnet.off-topic.debate)
| | | Re: Taxes from Lego auctions?
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| (...) I am sick as a dog, but I couldn't let this particular comment pass without commenting upon it myself. And BTW, it is my understanding that the 16th Amendment has essentially no force in law. It neither adds nor detracts from existing tax (...) (25 years ago, 17-Dec-99, to lugnet.market.theory)
| | | Re: Taxes from Lego auctions?
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| Will Middelaer wrote: snip... (...) 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 (...) (24 years ago, 19-Feb-00, to lugnet.market.theory)
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Message is in Reply To:
| | Taxes from Lego auctions?
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| I have been thinking about this issue for a long time and the recent discussions about states going after auctioneers and fining them made me wonder... Should a Lego collector claim sets s/he sells on ebay or serious collector or anywhere else on (...) (25 years ago, 17-Dec-99, to lugnet.market.theory)
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