posted on December 27, 2000 08:28:11 AM new
http://www.irs.gov/ind_info/tax_trails/5/atl5-1x115.html
Has this to say:
You must include on your return income from an activity not for profit (a hobby). Deductions for expenses related to the activity are limited to the amount of hobby income you report, and can be taken only if you itemize deductions on Schedule A, Form 1040.
If you collect stamps, coins, or other items as a hobby for recreation and pleasure, and you sell any of the items, your gain is taxable as a capital gain. However, if you sell items from your collection at a loss, [b]you cannot deduct a net loss. [b]
Note: NET is ALL your losses subtracted from ALL your profits. You can, however, sell a few dogs out of a collection at the same time you sell a real winner to minimize your paper profit. But if you cash out those Beanie Babies and realize you lost a gazillion bucks, you better sell some of the winners or eat the loss.
posted on December 27, 2000 09:33:08 AM new
Somebody needs to write a book about the tax ramifications of selling on internet sites [it's not just ebay, but half.com, etc]. There is so much confusion about definitions of "hobby", "yard sale", "business", not to mention charging sales tax, etc.
I just ordered a book from Amazon called "Starting Your Online Auction Business" which I hope will address issues relevant to part-timers like me [who also have a full-time job where withholding is being taken], not just the big boys who do it full-time.
posted on December 27, 2000 06:42:11 PM new
<<You must include on your return income from an activity not for profit (a hobby). >>
There is a lot more on what a hobby is in the tax laws, than this one simplified paragraph..be sure your Ebay sales are a hobby..most are not, but are selling for profit..and are a business, as we have been discussing on another thread. Plus, even to take this, you must be filling out a schedule A.You generally do much bettr filling out a schedule C.
Don't lose any deductions..make the most you can!
posted on December 28, 2000 07:31:58 AM new
if you are filling out a schedule C, take special note of the fairly new rules that allow you to expense some capital expenditures.
It used to be that if you made certain types of purchases (like a computer), you were required to set up an amortization schedule and do all that hoo-hah every year for 5 years. The new rules let you expense a few thousand dollars of capital expenditures. Effectively, you can take that new computer and turn it into a regular 1-year business expense. Much easier, and makes a big difference.
posted on December 28, 2000 07:58:27 AM new
<<if you are filling out a schedule C, take special note of the fairly new rules that allow you to expense some capital expenditures. >>
This has been around for a lot of years. It doesn't always work out to the advantage of a new person to take expensing. You may need the deduction later on when you actually are making money to place it against. Expensing (you are talking about section 179, right?) has a different set of rules.
I also don't suggest it for a new home biz, since somany of them fail in the first couple years, and you have to "give it back" or recapture.
