Would I Owe Federal Taxes?

[dusty]

If I have a Yard Sale and I sell a bunch of Shopsmith and old computer parts that I have out in the shed (parts harvested from upgrades), would I owe the Federal Government taxes on the proceeds. If yes, at what rate?

I just watched a short blurb on CNN that would indicate YES.

[reftech]

Was it a gain or loss? What did you pay for it and what did you sell it for.

[gac5ss]

Did you use the cost of these parts in a for profit business to reduce taxable income? Is your Shopsmith and computer items part of the "Cost of Goods Sold" in a for profit business?

If the answer is yes, it is taxable. The rate it is taxed may be at the ordinary income tax rate, or it could be at the capital gains tax rate. Depending on how long the item was kept, and how it was classified when you used it as a deduction.

If you are using the items sold in a hobby. I wouldn't worry about it.

I am not a tax accountant or attorney, so my advice should be not be used as fact.

[dusty]

Is the question really "What is income"?

Example 1:

Grandpa gave me an old Disston saw. If I sell it for $50, is that income. I paid nothing but received $50.

Example 2:

I bought a Craftsman circular saw. I paid $80 it for and hardly ever used it. I did not like it. It felt uncomfortable to hold and was too heavy. I sold it for $20. Is that a $60 loss that can be used to offset income?

BTW Nothing that I have ever done in my shop was done for profit. In fact, I have never sold anything that I built.

[BigSky]

As an individual tax payer and not a business operator, you have no operating costs or expenses to claim, I think. If you have "income", it is taxable. All that need be done is learn how to determine income.

If you won the lottery today, that is definitely income. Pay up. The Treasury needs your money.

If you received Food Stamps and Unemployment checks, those are income, I think. If you sold the band saw box that you made last week, the sold price is income, I think.

[hjlssfor1]

Is the question really "What is income"?

Example 1:

Grandpa gave me an old Disston saw. If I sell it for $50, is that income. I paid nothing but received $50.

Example 2:

I bought a Craftsman circular saw. I paid $80 it for and hardly ever used it. I did not like it. It felt uncomfortable to hold and was too heavy. I sold it for $20. Is that a $60 loss that can be used to offset income?

BTW Nothing that I have ever done in my shop was done for profit. In fact, I have never sold anything that I built.

Dusty, in my pre-retirement life I taught tax law, and I can answer your questions.

Example 1: your tax basis in the Disston saw is equal to your grandpa's tax basis (what he paid for it). To determine your gain or loss, compare the $50 you received for the Disston with your tax basis. If sold at a gain, the gain is subject to tax. If sold at a loss, it is a non-deductible personal loss. It is like selling your personal residence: sell at a gain, the gain (in excess of any exclusion, which now is $250,000 or $500,000 if married filing jointly and some other requirements are satisfied) is subject to tax; sell at a loss, and it is a non-deductible personal loss.

Example 2: Non-deductible personal loss.

Hank

[dusty]

[quote="hjlssfor1"]Dusty, in my pre-retirement life I taught tax law, and I can answer your questions.

Example 1: your tax basis in the Disston saw is equal to your grandpa's tax basis (what he paid for it). To determine your gain or loss, compare the $50 you received for the Disston with your tax basis. If sold at a gain, the gain is subject to tax. If sold at a loss, it is a non-deductible personal loss. It is like selling your personal residence: sell at a gain, the gain (in excess of any exclusion, which now is $250,000 or $500,000 if married filing jointly and some other requirements are satisfied) is subject to tax]

Hmmm. Does the fact that these are "non-deductible" personal losses essentially mean that they have no impact at all on my taxable monies?

[holsgo]

Who would know unless you were to tell? We hold one big neighborhood one every year. Paying taxes on anything is probably the furthest thing from anyone's mind. Right or wrong.

[flashbacpt]

Dusty,
I would not worry about it! Folks that have weekly yard sales are the ones that should be concerned. Many cities limit the number of sales, or require a permit. They are the ones that are running a business for profit.
A yard sale once in a while is not going to attract attention, nor will anybody be knocking on your door collecting unpaid taxes. Trying to figure out how much one paid for a screwdriver, a bowl, a scoop way back when is just nerve wacking! Have fun with your yard sale!

John
FlashbacPT

[dusty]

I had no idea, when I started this thread, that we would get into the tax discussion this deeply. However, it seems like we may end up discussing the 47% that do not pay their taxes. That estimate (47%) just may be very low.