Tax Question

[begsu1013]

don't seek tax info from a cardboard forum.

too many unknown factors here to give you a solid answer, honestly.

[egbeachley]

The profit/loss calculation has no bearing on where you live or how inventory is treated or where the sales took place. Location only affects the tax rate and who you pay it to. The profit, $5K in this example, never changes. That's assuming the sales expenses were legitimate (i.e. didn't personally fly to Hawaii to hand-deliver the card). Inventory rules only typically affects rotating inventory stock of homogeneous product. We can assume he knows how much was paid for each card.

[jcc6252]

Thanks for the responses, particularly Eric's. Two simple explanations that seem to make sense are that my increase in inventory only serves to put a dent in my pocket, and "inventory rules only typically affects rotating inventory stock of homogeneous product".

Yes, I have done a thorough job of recording inventory costs and legitimate expenses, so I should be good to go.

[Maddog]

Based only on the info provided, Kevin's computation is correct and your taxable income will be $5,000 (assuming the expenses are deductible).
The real issue is whether you are a business or this is just an occasional sale. The rules are quite different between a business and hobby activity.
I agree, you should consult your regular accountant since there is more that needs to be considered than can be discussed here, such as why are we discussing 2014 figures and not 2015?

[TanksAndSpartans]

Calling purchases inventory doesn't feel right to me. Let's take a hypothetical example to exaggerate things. Imagine I added $10,000.05 worth of items to my collection and I sold a card for 5 cents to a kid on my street. I doubt I could claim a 10K loss on my taxes.

[egbeachley]

Originally Posted by DezHood

Calling purchases inventory doesn't feel right to me. Let's take a hypothetical example to exaggerate things. Imagine I added $10,000.05 worth of items to my collection and I sold a card for 5 cents to a kid on my street. Would I be able to claim a 10K loss on my taxes?

Yes. If you sold the $10K card by accident and kept the 5 cent card. When buying lots you have to properly allocate based on fair value.

[TanksAndSpartans]

Originally Posted by egbeachley

Yes. If you sold the $10K card by accident and kept the 5 cent card. When buying lots you have to properly allocate based on fair value.

Right, I understand that part. I was trying to get at something different. A lot of us are collectors who occasionally sell a card. But it wouldn't seem like I could then take purchases minus sales and call it a loss because I bought more than I sold. Granted the OP seems to by buying with the intention to sell, but that's why I exaggerated the example.

[begsu1013]

i would also suggest talking w/ your accountant in terms of the items sold and whether they are "collectibles" or "investments". about a 9% difference in your tax rate there depending on how it's defined on your k1.