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Old 10-01-2018, 09:45 PM
 
Location: San Angelo, TX
1,773 posts, read 2,969,612 times
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I'll do my own actual research and talk to my accountant. But, I'd thought that this might generate a bit of discussion:

Two years ago I took a western saddle making class and at the end of the tutorial I made two full saddles. Yesterday, a friend came by and looked at my saddles, which I keep in the garage, and offered me $1800 for both of them. They each have some silver attached. We kept records of costs of supplies and labor by the hour in the class.

Is my labor taxable income, or am I just selling my property?

Thanks for any comments.
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Old 10-01-2018, 10:05 PM
 
1,131 posts, read 512,214 times
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Your basis from your labor is $0 unless you’ve been paid for your labor and previously recognized taxable income.
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Old 10-02-2018, 10:35 AM
 
Location: Florida
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Good question and I do not know the answer.
I would try and find an answer that would lead to not reporting the sale but I do understand that you want to do what is correct as we all should.

You also have state income and maybe sales tax. A number of states do not tax isolated (one time) sales and I would see if this theory can get you to no state income tax also.

For federal you have a hobby and not a business. Hobby expenses are not deductible and I would search to see if you can find support for the sale of hobby creations not being taxable as long as it is not a business.


If you sold your use chair to a neighbor would you report the income? I think most of us would not but then we probably paid more for the chair than we sold if for before depreciation.
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Old 10-02-2018, 10:39 AM
 
Location: Aurora Denveralis
8,083 posts, read 2,816,523 times
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The other issue with sales tax is that some jurisdictions tax labor and others do not. The core of my work bills on both hourly time and on finished goods; in California I loaded as much into labor as I could, as it was not taxable. In Connecticut there was no need to shift billing or even break it out, as both labor and goods were taxed. (And in Colorado it's so effing complicated I try to avoid all taxable sales...)

But it's probably true that the city/county/state does not care about one-shot sales under a certain margin.
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Old 10-02-2018, 11:47 AM
 
44 posts, read 17,368 times
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Well, good set of questions there. When does a hobby become a business, intent? Sales tax, FICA, SS, ACA obligations, work place regulations (zoning, fire code), 401k, equipment investment and depreciation... tricky.
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Old 10-02-2018, 12:01 PM
 
11,809 posts, read 21,373,538 times
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Quote:
Originally Posted by JesseD View Post
Well, good set of questions there. When does a hobby become a business, intent? Sales tax, FICA, SS, ACA obligations, work place regulations (zoning, fire code), 401k, equipment investment and depreciation... tricky.
Tricky? No...hand the saddles to the friend and put the $1800 in your pocket.
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Old 10-02-2018, 04:21 PM
 
Location: New Braunfels, TX
6,257 posts, read 8,985,070 times
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Unless you plan to continue doing this, yeah - toss it in your pocket and move along.
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Old 10-02-2018, 05:19 PM
 
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Seriously?

Uncle Sam steals enough of our money
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Old 10-03-2018, 02:07 PM
 
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Think of it like an eBay transaction. You just sold your property for $1800. There is no capital gain.
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Old 10-03-2018, 02:53 PM
 
1,131 posts, read 512,214 times
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Quote:
Originally Posted by COcheesehead View Post
Think of it like an eBay transaction. You just sold your property for $1800. There is no capital gain.
Because it was sold on eBay? Normally property sold on eBay is sold for less than what seller originally paid for it, thatís why thereís no taxable income (ordinary, capital gain or collectibles). If itís sold for more, as the OP described, then there is taxable income.

Whether itís reported is another matter.
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