Now, when you sell a used guitar...

[Synchro]

Hi Synchro,

Any profit, could be perceived as ''income''.

Anyone who buys and resells at a loss, or for ''cost'', is either temporarily or permanently in an unfortunate set of personal circumstances, or just careless and foolhardy.

As an example, selling on Reverb for a profit is ''income'', selling large quantities on Reverb, lets say a valuable vintage guitar collection for $150,000, which is not unheard of, is capital gain, and taxable.

Here in Canada, selling a second residence is ''capital gains''. Selling expensive collector vehicles is ''capital gains''.

You can be sure the IRS is standing in the wings at Barrett Jackson, when a car rolls across the block for seven figures.

Gambling winnings in Vegas/Atlantic City are taxable. Out of country winners can apply to get the taxes back, but, the the IRS is going to take the taxes first.

I'd have a pretty difficult time, in 2022, convincing Revenue Canada, that the sale of a $500,000. guitar collection, and a million dollar vintage Ferrari, is not taxable income, especially if in 1975 I bought the Ferrari for $35,000., and my ''cost'' for the guitar collection was $75,000.

As opposed to reselling my guitar collection and my vintage Ferrari at cost I'd happily pay the tax. That's still $1,000,000. in the bank, taxes paid, as opposed to $110,000. in the bank, and not having been required to pay any taxes.

As far as sales tax being levied on the receiving end, the receiver is the end, and if this tax is evaded, by whatever means, the receiver (me/you), can be held liable, and made to pay! Which by the way, is the primary reason ''smuggling'' is highly frowned upon. Evasion is evasion.

Just like getting paid under the table sounds like a good idea...GOOD...right up until you get that knock on the door.

Best,

BIB.

You might want to reread my comments. I’ve never said that taxes shouldn’t be paid on profits, but as I pointed out, my transactions on guitars and gear have been a net loss. I’ve always paid my taxes and never minded doing so. Never have I suggested under the counter transactions.

However, having to prove that you are not profiting from a mundane transaction seems a bit burdensome. It’s very unlikely that I would ever make a profit on my guitars. I’m not interested in selling for a profit, but I think that it’s a bit ridiculous to expect someone to prove what they paid for a guitar they’ve owned for decades.

 

[Back in Black]

You might want to reread my comments. I’ve never said that taxes shouldn’t be paid on profits, but as I pointed out, my transactions on guitars and gear have been a net loss. I’ve always paid my taxes and never minded doing so. Never have I suggested under the counter transactions.

However, having to prove that you are not profiting from a mundane transaction seems a bit burdensome. It’s very unlikely that I would ever make a profit on my guitars. I’m not interested in selling for a profit, but I think that it’s a bit ridiculous to expect someone to prove what they paid for a guitar they’ve owned for decades.

Don't forget,

We all know what a 58/59 Les Paul cost when it was new.

If you had one of each, that you've had since they were new, would you be willing to sell them for 1958/1959 prices, or less?

And don't think for a minute that revenue folks are not aware of escalating vintage values.

If I crossed the border into Canada, with a 1969 HEMI Roadrunner, in mint condition, that I just brought up from California, and told the Canadian Customs officers I paid $3500. for the car, it wouldn't take longer than 20 minutes before I was under arrest.

If you leave yourself open to suspicion, it doesn't take long before someone gets suspicious!

Best,

BIB.

 

[Bkat]

Here's a tangental question. Of all the guitars everyone has sold, how many were actually at a profit? Because, with this rule change, it's only profit that gets taxed.

 

[sgarnett]

Here's a tangental question. Of all the guitars everyone has sold, how many were actually at a profit? Because, with this rule change, it's only profit that gets taxed.

That is absolutely true, and as far as I know it doesn’t actually change what is taxable.

What it does do is impose the burden of proving there is no profit on hobbyist transactions.

I have never previously reported a guitar sale because I never sold one at a profit.

 

[Synchro]

What it does do is impose the burden of proving there is no profit on hobbyist transactions.

That’s the point, exactly.

I can promise you that I’ll never be selling a quarter million dollar ‘Burst. If I ever sell a guitar for a profit, I’m more than fine with paying tax on the profit. What I’m not fine with is the burden of proving something like that for every hobbyist transaction. I have several pedals I will probably never use again, which I’m hesitant to sell, because I don’t want to deal with a bunch of paperwork and possibly red tape. Such sales would prove a loss, so I would owe no tax, but the headache of documenting all of that makes it more practical to just keep the durned things.

 

[blueruins]

 

[ForTheLoveOfIvy]

Yeah I think Thunder's warning about politics in the discussion was probably a reference to posts 5 and 8. I was just kidding...I meant nothing political by it.

I thought carefully before posting... It wasn't political, it was more bureaucratic.. Like complaining about the DMV.
I hope it wasn't mistaken as political.. If so, please delete.

 

[Runamok]

That is absolutely true, and as far as I know it doesn’t actually change what is taxable.

What it does do is impose the burden of proving there is no profit on hobbyist transactions.

I have never previously reported a guitar sale because I never sold one at a profit.

Not to quibble.

Who else would provide proof, if not the person enacting the transaction & potentially the one profiting? Nobody likes it, but that’s the way taxes are done.

I can’t imagine how to do it differently.

You’d have to profit a great lot for this to be real income. At that point, its probably a business.

Is anybody losing big money on here?

 

[Wayne Gretschzky]

I'm old enough to remember when we didn't have Paypal, Venmo, and Reverb. It would seem that paying with a check (and waiting for the funds to clear before shipping) might experience a comeback. It's not as efficient and convenient but it seems to circumvent this new tax scenario... or will banks also be monitoring transactions and submitting 1099's?

 

[Bkat]

The IRS isn't going to audit everyone just because they have a 1099 attached to their tax return (they don't have the interest or capacity) so very few will ever need to "prove" original purchase price. 1099-Ks are very common addendums to tax returns anyways. It just means "miscellaneous income." A lot of folks have that already and now more will, it seems.

Who would more likely get checked are the ones generating dozens of 1099s. And if someone is in fact selling that much they are, as Runamok points out, doing it as a business (as opposed to selling one guitar just to buy another.) In which case, they are probably taking other business-related deductions related to the transactions that generated the 1099s and those would be bigger red-flags that would invite greater scrutiny than selling one or two guitars.

 

[nightbird]

Here's a tangental question. Of all the guitars everyone has sold, how many were actually at a profit? Because, with this rule change, it's only profit that gets taxed.

Just about every guitar I've ever sold, I made profit on. Not thousands of dollars, like a 59 LP, but some were over a thousand or more.
I think it's a bunch of BS that the guitar was sold when new and taxed. Then if I sell it on Reverb, Ebay, etc... I pay up to !0% sales fees + shipping. The new owner equally has to pay tax. And you get taxed, again, if you make profit?
Yeah, making a fake reciept from, let's say, 5 years ago being fraudulent? I'm ok with that. It's on the IRS to prove otherwise. Yes, they can audit me but doubtful as I'm not one of those, they are targeting, who make over $400,000 a year. I'm already taxed up the wazoo, every year and daily on food, gas, etc...
No moral dilemma here.

 

[Back in Black]

I'm old enough to remember when we didn't have Paypal, Venmo, and Reverb. It would seem that paying with a check (and waiting for the funds to clear before shipping) might experience a comeback. It's not as efficient and convenient but it seems to circumvent this new tax scenario... or will banks also be monitoring transactions and submitted 1099's?

Wayne,

Good question, unfortunately, with no real answer.

I'm still of the opinion that whether buying or selling (used, outside of retail) a lot of care and discretion has to be taken.

Not always possible but knowing the person you're dealing with is important, being fully familiar with the item in the transaction is important, and CASH is always king.

Buying and selling anything you have as ''possessions'' is very personal, and the transactions should stay personal.

Selling on Reverb/eBay and other such places is telling the whole world your private and personal business. Any wonder hacking, fraud and identity theft are rampant.

Even here on GT, would anyone (with all their faculties intact), post a thread, that they just sold a dozen rare/vintage guitars and ''made a bundle''?

I think that's highly unlikely!

BIB.

 

[Synchro]

I'm old enough to remember when we didn't have Paypal, Venmo, and Reverb. It would seem that paying with a check (and waiting for the funds to clear before shipping) might experience a comeback. It's not as efficient and convenient but it seems to circumvent this new tax scenario... or will banks also be monitoring transactions and submitted 1099's?

My banker and I have discussed this, at some length. As I understand it, basically all transactions above $600 will now be capable of being monitored. My banker was concerned that the reporting required was going to prove untenable.

Suppose a relative calls me up and needs to borrow $1,000 on short notice, because of an emergency. So if I send $1,000 as a loan, and perhaps a year later, that $1,000 is returned. Under the current practices, the recipient of such a loan could find themselves required to pay tax on this as income, and the lender could end up paying tax on the repayment of that loan, even though, in reality, it was a zero-sum transaction. The burden of proof would be on the shoulders of the taxpayers, and, in my case (at my tax bracket), lending a relative $1,000 could end up costing me hundreds of dollars, or require detailed records to prove that no taxable event occurred.

The IRS isn't going to audit everyone just because they have a 1099 attached to their tax return (they don't have the interest or capacity) so very few will ever need to "prove" original purchase price. 1099-Ks are very common addendums to tax returns anyways. It just means "miscellaneous income." A lot of folks have that already and now more will, it seems.

Who would more likely get checked are the ones generating dozens of 1099s. And if someone is in fact selling that much they are, as Runamok points out, doing it as a business (as opposed to selling one guitar just to buy another.) In which case, they are probably taking other business-related deductions related to the transactions that generated the 1099s and those would be bigger red-flags that would invite greater scrutiny than selling one or two guitars.

I’ll be interested to see how this plays out, over time. In any regulation, there has to be a bit of flexibility. For example, if I drive past a highway patrol officer using RADAR, at MPH over the speed limit, it’s very unlikely that I’ll be stopped and ticketed. To do so would be counterproductive to improving safety, because the officer’s time would be used on a problem that is a minimal risk to safety. IOW, while I’m getting a ticket for 1 MPH over the limit, chances are quite good that several people will drive by at much higher speeds, and the officer’s time would have been more productively spent on people whose speed was high enough to become a safety issue.

With regard to the matter at hand; will the IRS expend manpower on innocuous transactions that are not tax fraud, and getting no more revenue to show for it? In the meantime, innocent people are burdened with proving that the used guitar they sold on eBay, or the $1,000 they leant to a relative were not taxable events, which wastes a lot of time, for both the taxpayer and the IRS.

Back in the ‘90s, there was a news story in Denver, about some kids that ran afoul of the law, because they were catching snakes and selling them to their friends. For perspective, on the plains of Colorado, green Ribbon Snakes are ubiquitous, and certainly in no danger as a species. They are everywhere, and if you want to catch one, just put a piece of plywood on the ground during the warm months, wait a day or two, and when you lift the plywood, there will be a number of these harmless colubrids for you to choose from.

But someone felt that some eleven year-olds, selling snakes to their friends, required legal intervention, and actually expended public resources to shut down this business. That’s ridiculous. If you give it any thought whatsoever, this little enterprise would have burned itself out quickly; the repeat market for Ribbon Snakes is extremely limited. Whomever thought that this required official intervention needed to get a life. I didn’t sleep any more soundly, secure in the knowledge that some kids were no longer flaunting wildlife laws by selling captured snakes to their friends for a buck apiece. It made about as much sense as raiding a child‘s lemonade stand because they didn’t have a sales tax license.

Hopefully, good sense will prevail, and the threshold will be set to a realistic number.

 

[DavyH]

My own feeling is similar. The threshold value is set low enough that personal transactions are likely to be treated as if they were commercial transactions.

Music is not a business to me. I don’t want music to be a business. Music is a serious interest in my life, but I make my living in another field. If you were to chart out my musical purchases, there would be a net loss. I couldn‘t even come close to recovering my investments in guitars, amps etc. That‘s fine, because I do not expect my instruments to perform as an investment. If my transactions are going to come under scrutiny, starting at the $600 per year level, then should I be able to deduct the losses I have taken when I traded guitars in? It spirals, quickly, into something that could be unwieldy.

Well, if they're gonna 1099 you, then you're pretty well required to file on it, and at that point you can deduct the expenses. I have a vague recollection that you can't take a loss more than twice in 5 consecutive years, but as long as you have your documentation, it's not too hard to work the figures to where you can show just a minimal profit, and pay a couple bux on that.

It's only too true that keeping track of all that minutiae is a monumental PITA, especially for folks who, like musicians, are more interested in the quality of their beans and weenies than in counting the beans, but it's also true that the computer revolution of the last 40+ years has given the bean-counters a diabolical boost in their legume-enumerating capabilities, and they expect the same of us!

 

[blueruins]

 

[cheecharron]

Maybe we can dispense with the whole “IRS hiring 80+k agents” nonsense, which is blatantly political. The goal of the funding bill is to hire 87,000 staff, many of whom would not be agents, over a 10-year period to make up for attrition. See https://www.cnbc.com/amp/2022/08/31...-army-of-auditors-whats-really-happening.html

 

[sgarnett]

View attachment 191155
Whatever you do, don’t drink the Kool-Aid! I admit that while I recognize the photo, I don’t get the point - or the joke ….

 

[Londonbus]

 

[drmilktruck]

Reverb has all your transactions catalogued, so if I sell things there that I bought on Reverb, it's easy-peasy to prove things. eBay does do, although in less detail. beyond the last few years.

 

[Wayne Gretschzky]

H

Reverb has all your transactions catalogued, so if I sell things there that I bought on Reverb, it's easy-peasy to prove things. eBay does do, although in less detail. beyond the last few years.

Hey Jim... is it like Amazon where you can see your purchase history? I've never tried that on Reverb (probably because I don't want to admit what I've spent!).