[Exhibitman]

Not a surprise. Lower dollar and middle class tax returns are more likely to be audited than wealthy tax returns because small fry are easier to go after. You don't pick a fight with an 800# gorilla when you can beat up a spider monkey instead.

Your situation is unique and fact-driven, so there is no advice you can get here that will be worthwhile except to hire either an accountant or an attorney with audit defense experience. Sorry, but that's the reality of it. That said, I do have a few casual thoughts on the issues that part-time dealers face in general:

If there is a hobby vs. business challenge, did you follow the requirements of your state for doing business? For nearly all states, that would include applying for a resale permit and collecting and remitting sales taxes. If you did that, the odds of being labeled a hobby fall drastically.

One other thing to remember when dealing with tax authorities is that testimony is evidence. Just because you do not have a piece of paper does not mean you have no evidence of what you paid for a card. You will be surprised at how well you can recall card deals. I know I was recently when I bumped into a dealer who'd sold me some cards a decade earlier. I remembered exactly which cards I got from him. I can't remember to put away my shoes but the details of buying a 1967 Ken Holtzman signed card a decade earlier, yup.

Finally, preparation is key. Get your records in order and gather your thoughts in advance of meeting with the auditor and be ready to respond. Do not think you can outwit or anticipate the issue raised. You can't. You just have to play it where it lays.