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Hello, This is the situation. I have a couple credit cards

Hello, This is the situation...
Hello,

This is the situation. I have a couple credit cards with large limits. I wanted to convert this credit to cash by using the cards to purchase items.. then reselling the items for cash. For example if i use a card that has a $50,000 balance to purchase $50,000 dollars of gift cards then sell the gift cards for cash. Am i going to have to fill out any forms? when i deposit the cash into a bank account am I going to get into trouble? will i have to pay tax on this money if there is no gain?
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Answered in 4 minutes by:
8/10/2013
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55,807
Experience: 29 years of experience as a tax, real estate, and business attorney.
Verified
Welcome! My goal is to do my very best to understand your situation and to provide a full and complete answer for you.

Good morning. There is nothing that you legally have to do in order to accomplish what you want. There are no forms you need to complete. You have no tax on the money taken out of you credit card because it is a loan that must be paid back. Thus, it is not a gift and it is not income; and therefore, it is not a taxable transaction. If you deposit $50,000 in cash in your bank account, the bank will report the cash transaction, but that doesn't mean there is any tax or reporting requirement on you. If you sell the cards for more than you paid for them, you would have tax on the gain; but otherwise there is no tax incurred.



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Customer reply replied 4 years ago

Thank you for your quick response. So even though I am selling items to a bunch of different people for more then 10,000 dollars i would not have to fill out form 8300?

I'm sorry, I thought you were referring to whether or not you had any forms to fill out to take the money out of the credit card, deposit it into the bank, and to actually sell the cards. You will of course need to file a tax return for your business activity...which would include the completion of Form 8300 along with your tax return reporting the sales. I apologize for the miscommunication.
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Customer reply replied 4 years ago

So i would have to fill out a schedule c? the form 8300 is still needed even if i sell to 100 different people 500$ each transaction?

Thank you for following up. Legally, yes, you would need to report this on Schedule C, because this is business activity.
Richard
Richard, Tax Attorney
Category: Tax
Satisfied Customers: 55,807
Experience: 29 years of experience as a tax, real estate, and business attorney.
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