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Are liquidations of lifetime junks taxable sales?

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  • Are liquidations of lifetime junks taxable sales?

    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.


  • #2
    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.

    --
    This account is subject to a persistent MS Blaster and SWEN attack.
    I think I've got the problem resolved, but, if you E-mail me
    and it bounces, a second try might work.
    However, please reply in newsgroup.

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