Jun 29, 2015

When Does a Hobby Become a Business?

It was apparent from the wording of his forum post that Ben was overwrought. He had just received a 1099-K from eBay and feared that he would owe the IRS a lot of money. Ben wanted forum members to advise him on how he could maneuver through his difficulty.

It seems that Ben’s uncle had passed away, and a cousin (the estate executor) wanted Ben’s help in liquidating a garage, basement and closets full of 35 years’ worth of auction acquisitions. The family was aware that Ben was an active eBay seller, and they felt he was the ideal resource for selling the items. Out of a sense of family obligation, Ben accepted the job. The estate would pay him a modest fee for his help. But the proceeds from the estate sale added to his recurring eBay income lifted Ben above the $20,000 in payments and 200 transactions needed to generate a 1099-K. The amount he would likely owe exceeded the amount the estate had paid him, and since the estate was now closed out, there was no money available to cover the shortfall.

According to Ben, his eBay selling had never before reached this sales level. Although he admitted to regularly profiting from his selling activities, Ben claimed that eBay selling was “only a hobby,” and he felt that it was grossly unfair that the government should treat him as a business, and that eBay should issue him a 1099-K. >>> Read More

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