Tax Expert Question

[raulus]

Originally Posted by Kco

There is a reason I said it depends.

Perhaps you're not following my point, if he is a business that is absolutely different and he should be keeping proper P&L on his business and every single item. He'd also be able to offset any gain with purchases of other items for inventory to replace it or sales of other items at net loss.

The only part of your statement that I’m not following is your assertion that buying inventory is a deductible expense for a dealer.

Inventory is not deductible when a dealer buys it. It’s only deductible as cost of goods sold when the dealer sells it.

[Kco]

Originally Posted by raulus

The only part of your statement that I’m not following is your assertion that buying inventory is a deductible expense for a dealer.

Inventory is not deductible when a dealer buys it. It’s only deductible as cost of goods sold when the dealer sells it.

I was unclear here, I apologize. You can offset any profits with deductible expenses to negate any profit as a business, inclusive of COGS, you wouldn't pay capital gains on a single transaction.

So if he is a business taxes are calculated on profits after allowable expenses, which he doesn't appear to be.

[bnorth]

Originally Posted by Kco

I was unclear here, I apologize. You can offset any profits with deductible expenses to negate any profit as a business, inclusive of COGS, you wouldn't pay capital gains on a single transaction.

So if he is a business taxes are calculated on profits after allowable expenses, which he doesn't appear to be.

LOL, I sure hope a business owner isn't asking for tax advise on a BB card forum. As a long time business owner there is a lot of horrible advice in this thread. If you have ANY tax questions go to a professional. Asking tax advise on a forum is beyond silly and a great way to get in trouble with the state and IRS.

[raulus]

Originally Posted by Kco

I was unclear here, I apologize. You can offset any profits with deductible expenses to negate any profit as a business, inclusive of COGS, you wouldn't pay capital gains on a single transaction.

So if he is a business taxes are calculated on profits after allowable expenses, which he doesn't appear to be.

Your approach makes a lot of sense for a dealer. So when the dealer spends money on traveling to shows, and paying for tables, etc, then all of that is deductible. As long as the dealer is actually making money. For a dealer that only loses money (after deductions), the IRS will often reclassify this as a hobby, and disallow those deductions.

For the average collector/investor, their only costs and expenses are paying auction fees and maybe shipping. Usually those costs can be factored into the calculation of the gain on sale. Even grading costs can be rolled into your basis and used to offset your gain on the sale. So the only downside is for a collector/investor who spends a lot on travel and shows, those costs wouldn’t be deductible. I have attended 1 whole show in my entire life. So definitely not me.

So for most of us, schedule C would probably be a mistake. Unless we are really acting as dealers, with all of the action that comes with it.