Help: Buying lots of various items. How to determine per price value (EBay selling)
I buy storage lockers and sell on EBay. I generally toss some items, keep some items, and sell some on EBay. How do I properly determine the per price value of the items?
For example. I may but a locker for $400 with 100 non-identical widgets. Then say I keep 30 widgets for myself, throw away 30 widgets, and sell 40 widgets for $10 each giving me a gross of $400. Do I have net income of $0 even though I kept 30 widgets? Do I simply assume each widget is $4 each even though they are not the same item?
Posted Jun 23, 2019, 11:59 PM UTC
713
Well, taxation is based on consistent and reasonable accounting.
If you acquire 100 widgets and throw away 30, you really only buy 70 widgets with approximately $5.6 average cost (approx). For your sales of $400 (40 widgets at $10 each) your cost, then, is approximately $230. $170 is your gross profit.
This is a simplistic scenario, the key thing is to apply your policies consistently and prudently.
+1 for this answer. The IRS allows the use of estimates so long as their made in good faith and you keep documentation to support your positions
Thanks. So anything I buy that can not be resold due to damage can not be written off? What if I were to donate them to charity?
If they cant be sold then their value is zero? What's the point of donating crap to a charity
I am fairly sure there are people that do what I do that will buy lockers and donate say the broken power tools or electronics to charity for a write off. Not sure what they list the value of those items as. I know some broken items still have value.
Also, going back to my previous example. If I essentially buy 70 working widgets, but keep 30 for my own personal consumption with no intention of ever selling, why could I not list cost per widget as $10 so that my cost is offset by my sell price and I have a net income of $0? Then say if I sold the ones I kept years later for whatever reason l, I just list the cost as $0, so for that year the net would be $300? Would that be fair accounting?
Just wondering because I also collect specific things with no intention of selling. A lot of my purchases are to grow my hobby collection and I really only sell to essentially break even after I take what I want.
How you split the value between what you sell and what you destroy/donate makes no difference for your bottom line. If you buy 4 widgets for 100.00, and claim the one you donate is 100.00 and the 3 you sold are worth 0, then you just show 100.00 more profits when you sell. So taxes are the same as if you said each one you sold was worth 33.00, but the one you donated was worth 0. Donating or destroy, the affect on taxes is the same.
On the keeping some for personal use though, you need to be careful. You can't buy 4 for 100, say the one you use personally is only worth 0, and the 3 you sell are worth 33 each. That would be tax fraud. You need to report the 25.00 value of the personal use one as an owners compensation, a taxable benefit you got.
If you are doing this as a hobby, with no profit motive then you can't deduct any expenses at all. But have to pay taxes on 100% of sale price. So be very careful with this. Pay your business back for any thing you personally keep, and show a profit. Running this aa a hobby is bad news for taxes.