OT: IRS Paypal Tax Situation

[birdman42]

Originally Posted by Batpig

I'm looking at a similar circumstance, however I'm selling for my dad using my paypal/eBay. I'll get the 1099, but will I just report an equal amount paid out as consignment somehow? Do friend and family transactions count toward that limit?

No good deed goes unpunished...

Second question first: If you're using PP to send him the proceeds by F/F, then no it doesn't count--because the 1099-K only shows money you've received. See Leon's response above for the situation if you're receiving money via F/F.
Now to the main event. I've prepared returns for people in your situation--where their eBay/PP account is being used as essentially a consignment shop. In that case I showed all the income (from the 1099-K), all the expenses, and the balance as cost of goods sold--so exactly zero profit. It's up to your dad to report the income on his tax return.

If you're selling off his long-time collection, then the income gets reported on his Form 8949 (which flows to Schedule D) with his costs as the basis. The amount of his receipts is everything he got from you.

Here's an example:

You sell a card for $100 plus $3.75 in shipping = $103.75. eBay/PP fees and shipping come to $20. You give your dad the remaining $83.75. On your Schedule C you show income of $103.75, expenses of $20, and COGS of $83.75.

Your dad paid $15 for the card in 1962. On his 8949 he shows a selling price of $83.75 and a basis of $15.

Did one of you pay to have the card graded? If it's you, the grading fees appear as an expense. If it's your dad, they show up as an increase in his basis.

If this series of events were ever questioned (and that's possible, with a Schedule C showing exactly zero) then in your reply you'd explain that this was a consignment situation for your dad, and include a copy of his return showing where the gain was reported.

Bill

[Batpig]

That's really helpful information. Thank you very much!

Originally Posted by birdman42

Second question first: If you're using PP to send him the proceeds by F/F, then no it doesn't count--because the 1099-K only shows money you've received. See Leon's response above for the situation if you're receiving money via F/F.
Now to the main event. I've prepared returns for people in your situation--where their eBay/PP account is being used as essentially a consignment shop. In that case I showed all the income (from the 1099-K), all the expenses, and the balance as cost of goods sold--so exactly zero profit. It's up to your dad to report the income on his tax return.

If you're selling off his long-time collection, then the income gets reported on his Form 8949 (which flows to Schedule D) with his costs as the basis. The amount of his receipts is everything he got from you.

Here's an example:

You sell a card for $100 plus $3.75 in shipping = $103.75. eBay/PP fees and shipping come to $20. You give your dad the remaining $83.75. On your Schedule C you show income of $103.75, expenses of $20, and COGS of $83.75.

Your dad paid $15 for the card in 1962. On his 8949 he shows a selling price of $83.75 and a basis of $15.

Did one of you pay to have the card graded? If it's you, the grading fees appear as an expense. If it's your dad, they show up as an increase in his basis.

If this series of events were ever questioned (and that's possible, with a Schedule C showing exactly zero) then in your reply you'd explain that this was a consignment situation for your dad, and include a copy of his return showing where the gain was reported.

Bill