Assume an individual sells merchandise on eBay that he originally purchased for his personal use and not for resale.  He receives a Form 1099-K reporting the gross payments. How should items be reported in his tax return.

1. What would be reported as “cost of goods sold”.
   1. He cannot report the original cost because he would then be reporting a loss on the sale because he probably paid more for the item as compared to the selling price.
   2. Should he report a “purchase” and a resulting cost of goods sold equal to the selling price?   This would result in a “0” cost of goods sold, but the after reporting the eBay selling expenses, his business would have a loss for the year and the IRS might object to a loss being reported on the sale of his personal items.
   3. Should a “purchase” be reported as the net amount of selling price less selling expenses so that the net income of the business would be “0”.

Glenn Zoellick

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