Level 3

Question

Nondeductible Loss on Schedule C?

Forum|Forum|4 years ago
March 23, 2022
17 replies
89 views

A client took in over $8,000 in gross sales in 2021, on somewhere between 250-300 transactions using Paypal on the sale of their used clothing. Based on those numbers, this seems to be rising to the level of a reportable trade or business.

They have original receipts for all items and are using these for their cost basis. After Paypal fees and shipping costs, they have calculated a small loss, but because they are selling used personal property, this loss is not deductible to them.

The ProSeries Schedule C does not seem to allow for this situation or the reporting of a nondeductible loss on a “business.” When I try to zero out the loss as an expense line item entitled “nondeductible personal property loss,” it won’t allow a negative expense figure. Is there another way to report their figures without taking the Schedule C loss?

They believe their sales will be even greater for 2022, so they will undoubtedly receive a 1099-K in 2022 and will face this same issue.

ProSeries Professional

This topic has been closed for replies.

Just-Lisa-Now-

Intuit Community Champion

If theyre not in the business of selling items, sale of personal property would be reported on Sch D, Code L, no loss allowed.

If it is a business, then a loss would be allowed.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

M

MactaxesAuthor

Level 3

I was seeing 250-300 transactions as rising to the level of a "side" business, but I see your point about Schedule D, Code L. If they receive a 1099-K for these transactions in 2022, wouldn't that need to then go on a Schedule C?

qbteachmt

Level 15

"They believe their sales will be even greater for 2022"

So, are they selling their own clothes, or are they buying locally and then selling? And, you stated they have a Loss, but they intend to keep doing this? Wouldn't it be cheaper to donate your own clothes to Goodwill? At least there is no Cost for that.

Don't yell at us; we're volunteers

sjrcpa

Level 15

I don't think they can use original cost of the clothes when new, since they are used at the time of sale.

There's a rule about converting personal property to business use where you use the lower of cost or FMV on the date of conversion. Usually applies to real estate but I would think it applies here, too.

The more I know the more I don’t know.

qbteachmt

Level 15

"I don't think they can use original cost of the clothes when new, since they are used at the time of sale."

Exactly! That's why I asked if they are just now buying to sell. Because this seems like a "flipping" operation and it is not going well.

Don't yell at us; we're volunteers

M

MactaxesAuthor

Level 3

Not flipping operation. It's a boutique baby clothes shopping problem and she is trying to recoup some of her cost by selling online. I also see the point about converting personal property to business use and using the lower of cost or FMV. But then we are creating a loss with fees and shipping....

rbynaker

Level 13

Maybe I'm in the minority but I'm not seeing a business here. Cleaning out the attic/garage is not a trade or business. If she were buying stuff in thrift stores and then selling them online then yes, that's inventory and presumably there's a profit motive. But selling your own (kids) clothing sure sounds to me like a non-deductible personal loss.

I reported one last year in other income (Sch 1 somewhere now?)

1099-K from Paypal $xxx
Personal items sold on ebay at a loss -$xxx

Schedule 1 Line 8 $0

Won't know how it went until 4/16/24. 🙂

Rick

Just-Lisa-Now-

Intuit Community Champion

This is exactly the approach Ive been taking with these as well. Think of it a a garage sale that reaches people much further than your yard.

♪♫•*¨*•.¸¸♥Lisa♥¸¸.•*¨*•♫♪

qbteachmt

Level 15

I doubt there is a loss, once this is properly costed. The issue is, personal activity or not? Because I believe "loss" will fall out of the story, once the story is corrected.

Don't yell at us; we're volunteers

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