You are correct on the two pronged test, I misread the CFR. I am an idiot.
Seems dumb that the IRS would exempt reporting of an ebay seller that had three coin transactions of 2 million each and yet require the reporting of an ebay seller that had 201 coin transactions of $1000 each.
Government is the great fiction through which everybody endeavors to live at the expense of everybody else. - Bastiat
Wrong. Per the Federal Register, 26 CFR (Code of Federal Regualtions) Vol. 75, No. 157, page 49827, "Further, section 6050W(e) provides a de minimis exception that exempts third party settlement organizations from reporting transactions with respect to a payee if the aggregate amount of such transactions does not exceed $20,000 or the aggregate number of such transactions does not exceed 200." The key word here is OR, notice that they did not say AND. >>
This is what I think it says. You have to follow the thought all the way thru as reading Govt rules.
"from reporting transactions with respect to a payee if the aggregate amount of such transactions does not exceed $20,000 "
OR
""from reporting transactions with respect to a payee if the aggregate number of such transactions does not exceed 200"
That is the correct interpretation IMHO. It does not require both tests to be made, only one.
"If a train leaves Chicago at 9 a.m. traveling east at 55 mph, and another train leaves New York at the same time, traveling west at 70 mph, how many licks does it take to get to the center of a Tootsie pop on a Tuesday if the moon is full and the trombone salesman does NOT interact with 17 midgets?"
This is an IRS treatise on whether your hobby can be treated as a business engaged for profit (and loss) or treated strictly as a hobby. This treatise does not discuss investment versus hobby.
This will answer many questions.
====================
Is Your Hobby a For-Profit Endeavor?
FS-2008-23, June 2008
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby.
Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”
Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.
Is your hobby really an activity engaged in for profit?
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
* Does the time and effort put into the activity indicate an intention to make a profit? * Do you depend on income from the activity? * If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business? * Have you changed methods of operation to improve profitability? * Do you have the knowledge needed to carry on the activity as a successful business? * Have you made a profit in similar activities in the past? * Does the activity make a profit in some years? * Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
* Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full. * Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category. * Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
<< <i>If you can demonstrate that you buy collectibles as an investment or intended to purchase this painting strictly as an investment then the answer is yes. >>
The term "demonstrates" means the following:
(1) The property was not for personal use. (2) The property was not primarily for personal enjoyment (which may or may not include personal use) (3) Adequate financial records are maintained to record cost and sales prices as well as dates. (4) I have not seen anything in the IRS records that there is an expectation of profit. This is different from the hobby rules which includes expectation of making profits.
Investment Property
Investment property is a capital asset. Any gain or loss from its sale or trade is generally a capital gain or loss. Gold, silver, stamps, coins, gems, etc. These are capital assets except when they are held for sale by a dealer. Any gain or loss you have from their sale or trade generally is a capital gain or loss.
Stocks, stock rights, and bonds. All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock and Losses on Small Business Investment Company Stock in chapter 4 of Publication 550.
Personal Use Property
Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. However, you cannot deduct a loss from selling personal use property.
The wife is a Chinese citizen and has a house there. I guess when it comes time to liquidate my collection I can do it from there. If I do, don't block me, you'll be able to tell my listings they will have better than average grammar than the rest of the China sales! You likey you buy.
Comments
Seems dumb that the IRS would exempt reporting of an ebay seller that had three coin transactions of 2 million each and yet require the reporting of an ebay seller that had 201 coin transactions of $1000 each.
Government is the great fiction through which everybody endeavors to live at the expense of everybody else. - Bastiat
1/2 Cents
U.S. Revenue Stamps
Wrong. Per the Federal Register, 26 CFR (Code of Federal Regualtions) Vol. 75, No. 157, page 49827, "Further, section 6050W(e) provides a de minimis exception that exempts third party settlement organizations from reporting transactions with respect to a payee if the aggregate amount of such transactions does not exceed $20,000 or the aggregate number of such transactions does not exceed 200." The key word here is OR, notice that they did not say AND. >>
This is what I think it says. You have to follow the thought all the way thru as reading Govt rules.
"from reporting transactions with respect to a payee if the aggregate amount of such transactions does not exceed $20,000 "
OR
""from reporting transactions with respect to a payee if the aggregate number of such transactions does not exceed 200"
That is the correct interpretation IMHO. It does not require both tests to be made, only one.
Government is the great fiction through which everybody endeavors to live at the expense of everybody else. - Bastiat
1/2 Cents
U.S. Revenue Stamps
This will answer many questions.
====================
Is Your Hobby a For-Profit Endeavor?
FS-2008-23, June 2008
The Internal Revenue Service reminds taxpayers to follow appropriate guidelines when determining whether an activity is engaged in for profit, such as a business or investment activity, or is engaged in as a hobby.
Internal Revenue Code Section 183 (Activities Not Engaged in for Profit) limits deductions that can be claimed when an activity is not engaged in for profit. IRC 183 is sometimes referred to as the “hobby loss rule.”
Taxpayers may need a clearer understanding of what constitutes an activity engaged in for profit and the tax implications of incorrectly treating hobby activities as activities engaged in for profit. This educational fact sheet provides information for determining if an activity qualifies as an activity engaged in for profit and what limitations apply if the activity was not engaged in for profit.
Is your hobby really an activity engaged in for profit?
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business or for the production of income. Trade or business activities and activities engaged in for the production of income are activities engaged in for profit.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:
*
Does the time and effort put into the activity indicate an intention to make a profit?
*
Do you depend on income from the activity?
*
If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?
*
Have you changed methods of operation to improve profitability?
*
Do you have the knowledge needed to carry on the activity as a successful business?
*
Have you made a profit in similar activities in the past?
*
Does the activity make a profit in some years?
*
Do you expect to make a profit in the future from the appreciation of assets used in the activity?
An activity is presumed for profit if it makes a profit in at least three of the last five tax years, including the current year (or at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses).
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
What are allowable hobby deductions under IRC 183?
If your activity is not carried on for profit, allowable deductions cannot exceed the gross receipts for the activity.
Deductions for hobby activities are claimed as itemized deductions on Schedule A, Form 1040. These deductions must be taken in the following order and only to the extent stated in each of three categories:
*
Deductions that a taxpayer may claim for certain personal expenses, such as home mortgage interest and taxes, may be taken in full.
*
Deductions that don’t result in an adjustment to the basis of property, such as advertising, insurance premiums and wages, may be taken next, to the extent gross income for the activity is more than the deductions from the first category.
*
Deductions that reduce the basis of property, such as depreciation and amortization, are taken last, but only to the extent gross income for the activity is more than the deductions taken in the first two categories.
Related Item: Publication 535, Business Expenses
<< <i>If you can demonstrate that you buy collectibles as an investment or intended to purchase this painting strictly as an investment then the answer is yes. >>
The term "demonstrates" means the following:
(1) The property was not for personal use.
(2) The property was not primarily for personal enjoyment (which may or may not include personal use)
(3) Adequate financial records are maintained to record cost and sales prices as well as dates.
(4) I have not seen anything in the IRS records that there is an expectation of profit. This is different from the hobby rules which includes expectation of making profits.
Investment Property
Investment property is a capital asset. Any gain or loss from its sale or trade is generally a capital gain or loss.
Gold, silver, stamps, coins, gems, etc. These are capital assets except when they are held for sale by a dealer. Any gain or loss you have from their sale or trade generally is a capital gain or loss.
Stocks, stock rights, and bonds. All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock and Losses on Small Business Investment Company Stock in chapter 4 of Publication 550.
Personal Use Property
Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. However, you cannot deduct a loss from selling personal use property.