Cost of Goods Sold Amount for eBay Garage Sales

[Glenn Z]

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

*********

[sjrcpa]

@Glenn Z

This is a public forum. DO NOT post your phone # or email.

[Just-Lisa-Now-]

IRS explains how to report personal sales reported on a 1099K

https://www.irs.gov/businesses/what-to-do-with-form-1099-k

Glenn, you should remove your phone number from your post, you dont want it harvested by spam bots, nor do you want strangers on the internet calling you.

Click the 3 dots in the top right corner of your post and choose Edit.

[sjrcpa]

Jinx

[BobKamman]

You’ve come to an Intuit site supporting tax professionals, and you may be looking for support as an individual taxpayer. Please visit the TurboTax Help site for support.

[qbteachmt]

"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."

Well, the taxpayer has to determine if this is a business or not. You just stated this as if that doesn't matter.

"Assume an individual sells merchandise on eBay that he originally purchased for his personal use and not for resale."

So, not collectibles, not for investment purposes, and not for resale. Just selling personal goods.

"He cannot report the original cost because"

Because everything is not new, is used or old, and had only the residual value = what it sold for. Don't overstate the conditions. Stick to the facts.

"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,"

I think you meant, 0 profit.

You should read IRS directions, and your taxpayer client needs to pay attention to what eBay provides, such as:

https://www.ebay.com/sellercenter/resources/changes-to-ebay-and-your-1099-k