Overpriced cards on ebay -- Are they part of a tax scam?

[Exhibitman]

Inventory is not a deduction unless it goes bad [like perishables that spoil] and you write it off. Otherwise, you carry it until disposition.

The only "tax angle" at the end of the year for a calendar year taxpayer with a card selling business is to offset actual gains from the rest of the year with losses by dumping bad inventory at a loss to free up cash flow. The theory is that if you are in the top marginal tax brackets for Fed and state then every dollar of profit will be taxed at about 40%, so if you sell dead inventory [the junk we all accumulate and can't seem to get rid of] at a blow-out sale resulting in a loss, the loss offsets marginal profits you've already realized and you are effectively dropping about 40% of the loss on the government. It isn't a recipe for success but is sometimes done when cash flow [say for an upcoming auction] is a consideration and it's time to clean out the junk box. Letting the G absorb 40% of the loss can be somewhat soothing...

[Runscott]

Originally Posted by Exhibitman

Inventory is not a deduction unless it goes bad [like perishables that spoil] and you write it off. Otherwise, you carry it until disposition.

The only "tax angle" at the end of the year for a calendar year taxpayer with a card selling business is to offset actual gains from the rest of the year with losses by dumping bad inventory at a loss to free up cash flow. The theory is that if you are in the top marginal tax brackets for Fed and state then every dollar of profit will be taxed at about 40%, so if you sell dead inventory [the junk we all accumulate and can't seem to get rid of] at a blow-out sale resulting in a loss, the loss offsets marginal profits you've already realized and you are effectively dropping about 40% of the loss on the government. It isn't a recipe for success but is sometimes done when cash flow [say for an upcoming auction] is a consideration and it's time to clean out the junk box. Letting the G absorb 40% of the loss can be somewhat soothing...

Thanks for the tips, Adam

[HexsHeroes]

Originally Posted by Runscott

Thanks for the tips, Adam

. . . operating an "on-line" business for afew years, inwhich some expendable items are sold, while preserving one's primary collection/inventory with unrealistic BIN prices) might see like a plausible strategy for preparing for future liquidation of one's collection (via 3rd party auction) inorder to avoid the higher 28% tax treatment from sales of "collectibles". I'm just not sure what the IRS would deem an acceptable level of annual sales, to justy calling something a "business".

I realize this is not likely what's happening with the number of eBay dealers with unrealistic BIN prices, but the above thought/strategy has crossed my mind when I have contemplated the possibility of selling my collection in 5, 10, maybe 15 years from now.