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Potential Tax Liability

I have a friend who inherited many electronic items including those of the audiophile variety. Through ads on this site and others, he sold about $60k worth of equipment within this year.   He is not a dealer and does not have a business, either physically or on paper.  Most of the payment transactions were made through PayPal. He is now worried about potential tax liability. Sometimes he created invoices. Sometimes the money was sent through PayPal's "Friends and Family" option. The money was transferred from PayPal to his bank account periodically. It suddenly occurred to him about possibly having a tax liability.    Made me curious too.   Would these proceeds need to be declared as income to the IRS?
kodak805
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jea48
4,323 posts
 

Good chance your friend will get a 1099 from PayPal. If so PayPal will also send a copy to the IRS. I would imagine the person that does his taxes will have to fill out a form explaining the money from the sale of the estate items. Also probably proof of inheritance of the items sold.


Quote: 

What is Internal Revenue Code (IRC) Section 6050W?

Under the IRC Section 6050W, PayPal is required to report to the IRS the total payment volume received by US account holders whose payments exceed both of these levels in a calendar year:

  • US$20,000 in gross payment volume from sales of goods or services in a single year
  • 200 separate payments for goods or services in the same year
 

IRC Section 6050W applies to all payment processors, including PayPal. Our goal is to help PayPal sellers understand and comply with the requirements.

https://www.paypal.com/webapps/mpp/irs6050w

.

 

czarivey
5,758 posts
 
Oregonpapa made interesting conclusions:

I used to keep up with the tax code as it pertains to residential real estate, including rental properties and such. BUT, the changes to the tax code started coming so rapidly, I just couldn’t keep up with it anymore. Now, the tax code exceeds 77,000 pages and contains over 9 million words.

For a Realtor (or anyone else) to give tax advise to a client is just opening up one’s self to a law suit. Anymore, I just refer my clients to their CPA or to their tax attorney. Knock on wood ... 40 years and never been sued.

Take care Steve ... and thank you.

Frank

https://www.youtube.com/watch?v=Nn_Zln_4pA8

Who’s going to read 77k pages? Instead of that more-likely it will be driven by common sense and the common sense is that it’s a USED product not new. If it’s used than tax had already been paid and double-jeopardy will make no sense.

If you get 1099 -- it’s a very flexible form allows you to wriggle your spending and earning to the point you can even claim losses out of this sale endeavor. All you have to do is to bring this form via TurboTax and fill-in

ALL of your expenses towards this form including gas, airplane tickets(if any mak’em business trip and include your wife and family members as well), shipping labels, shipping materials(hey they can be more expensive than unit itself) Check out UPS packaging services that sell you large corrugated boxes for over $100 each!
There are sooo many items you can claim claim and claim as losses that will overlap these measurable $60k TWICE.


almarg's avatar
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almarg
9,670 posts
 
If it’s used than tax had already been paid and double-jeopardy will make no sense.
Not sure if you are referring to sales tax that may have been collected by the original dealer from the original purchaser, or to income tax that may have been paid by the original dealer based on his profit from the sale. But neither is relevant to the question.
...you can even claim losses out of this sale endeavor.
Yes, as I mentioned in my initial post that is a possibility, within certain limitations.

Regards,
-- Al

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