Are liquidations of lifetime junks taxable sales?

[edfan]

A topic keeps coming up in Ebay message boards: if a collector or
junkaholic decides suddenly to get smart and save up for retirement,
can they liquidate everyhing without being taxed for the whole thing
as if they'd bought it intending to sell? Clutterbugs often congregate
in Ebay and you see them selling off everything to the walls, often at
great losses. Do people have to pay taxes over and over again on items
they have accumulated over a lifetime? If they take advantage of
Paypal to make that liquidation faster or more convenient (for
recordkeeping), do they automatically incur the appearance of being a
professional seller, thereby triggering taxing agencies to demand they
get, for instance, a resale license or sales tax permit? Is it
advantageous for them to get such licenses and permits, then account
for it as personal property turned into inventory - and take the
losses that usually accompany such conversions? (Collectors usually
buy retail and sell wholesale -- that's not exactly the usual route to
riches....)

The question seems to come up so regularly, it's a wonder states have
not devoted pages in their web sites to discussing this issue but I
haven't seen any yet that do.

[Arthur L. Rubin]

Are liquidations of lifetime junks taxable sales?

edfan wrote:

A topic keeps coming up in Ebay message boards: if a collector or junkaholic decides suddenly to get smart and save up for retirement, can they liquidate everyhing without being taxed for the whole thing as if they'd bought it intending to sell?

You seem to be confusing two tax questions. For income taxes, it
would be better if he HAD been intending to sell them, making
losses deductible. By the way, in the part I <snipped>, you
refer to converting personal property to inventory. _I_ don't
think it would be "inventory", but a capital asset, but the basis
for gain is the original basis (probably purchase price), and
the basis for loss is the LESSER of the original basis and the
value at the time of conversion. This modifies the rule that
losses on sale of personal property are non-deductible.

For a resale license or sales tax license (which are not the
same in all states), the question is different. In California,
"occasional sales" (defined as no more than 2 or 3 per (calendar)
year) are exempt from registration and sales tax regulations,
although the buyer still has to be use tax unless HE is holding
the property for resale.

You would probably get more authoritative answers on
misc.taxes.moderated. Than on misc.legal.moderated.

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