quote:

Originally posted by V-Tail:]
You buy something new, for ten dollars. As you use it, it depreciates in value. Say, for example, it has depreciated by seven dollars, so now it is only worth three dollars.

You sell it on eBay for five dollars. You just made two dollars, pay the tax man.

This is not the case. I've never expensed depreciation on the item because it's inventory. Now if it were a piece of equipment that you've taken depreciation on over it's life, then sure.

quote:

Originally posted by BlackTalonJHP:

quote:

Originally posted by V-Tail:]
You buy something new, for ten dollars. As you use it, it depreciates in value. Say, for example, it has depreciated by seven dollars, so now it is only worth three dollars.

You sell it on eBay for five dollars. You just made two dollars, pay the tax man.

This is not the case. I've never expensed depreciation on the item because it's inventory. Now if it were a piece of equipment that you've taken depreciation on over it's life, then sure.

Why is this "not the case?"

If I buy a metric crescent wrench for ten bucks, it depreciates over time as I use it in my business. Once I have taken depreciation amounting to 70% of the initial cost, I decide to sell it. Ebay buyers bid five bucks, so I have sold it for two dollars more than the depreciated book value. Are you saying that I do not have to pay tax on that two bucks?

Because I haven't "taken depreciation amounting to 70%" or any percentage.

It's the same as having a garage sale. You buy a recliner for $500 and use it for 10 years. You then sell it for $50.
Your book value is still the same as the historical cost because you've never taken depreciation on it. If indeed your book value was $0, then sure you would have a $50 gain on the sale of your asset, but it's not zero.

In the thousands of tax returns I've filed, I've never once declared garage sale proceeds as income for any client.

I don't know if it's every seller or every state or what.

I know sometimes I get hit with tax and other times, like this week-end, I bought two pairs of boots (one Saturday and one Sunday) and paid exactly the price for the items-no tax.

Bob