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hi I have question please this year I bought 2 luxury watches

by my credit cards and...
hi I have question please this year I bought 2 luxury watches by my credit cards and I sold it to my relatives and I got good money but I am not doing that all the time what I should consider this when I fill this year tax return ?
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Answered in 51 minutes by:
11/3/2013
Dave CPA
Dave CPA, Accountant
Category: Tax
Satisfied Customers: 840
Experience: Vast knowledge within the accounting/tax industry
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Hello,

Welcome to Just Answer,

If you sold the watch at a gain you should include the amount on line 2 on form 1040. If you sold the watch and you didn't make any money there would be nothing to report. Please let me know if you have any questions before you rate my answer. A positive rating is what I strive for. Regards Dave.
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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,887
Experience: 15years with H & R Block. Divisional leader, Instructor
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Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.

I have to disagree with some the information given above, especially about the reporting of the sale on "line 2 on form 1040".
Let me explain, almost everything you own and use for personal or investment purposes is a capital asset. When a capital asset is sold, the difference between the basis (usually cost) in the asset and the amount it is sold for is a capital gain or a capital loss.
Capital gains and deductible capital losses are reported on Form 1040, Schedule D (PDF), Capital Gains and Losses, and on Form 8949 (PDF), Sales and other Dispositions of Capital Assets.
Gains are added to your income but losses on personal property are not allowed to subtract from your income because they are personal use property.
Now you stated "but I am not doing that all the time". If you are making money doing this on a regular basis and it is not an occasional sale, you would just report the transaction as I stated above on the forms. When trying to make this choice look at it like a garage sale (happens maybe 2 times a year. Not an ongoing activity. If you are doing this more often you maybe in a business.

I sincerely XXXXX XXXXX information is useful.
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Sorry I meant to say line 21 which is the same tax rate as a short term capital gain since you purchased this year and the same out come. If if this was sold at a loss there would be no deduction.
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Line 21 is not the correct line to list this income. You made a purchase then resold to someone else. It is a sale.
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Customer reply replied 4 years ago

thank you so much for your information just I want o clarify something


honestly my relatives request me to find these watches I mean I didnt buy it to own what happened they sent me money but I was keep searching for those watches online until I found it online on sale then I bought it and I send it and the price difference was mine witch was good money like 8000$ so just miss robin I need to be sure when I fill this year because last two years I filled and then now I am going to amend it because of such issues.

If you received $8000 more for the watches then you paid you are required to report in as a sale.
Just show the purchase date on the 8949 and the sale date. You will be paying US tax on the difference.
When you amend just make sure to include this.

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Customer reply replied 4 years ago

thank you just if you can make it easier for me where is exactly on Turbo Tax soft ware .which section please because it is confusing ?

In Turbo Tax look under Wages & Income page, down in the investment income section...then the software fills out the 8949 for you. (and the Schedule D)
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Customer reply replied 4 years ago

If I amend and the calculation was they (IRS ) gona get part of credits back would they charge me penalties or interest or this in case only when I own them money because I still have credit even after I might


need to return part of the credit please answer me about that .

Hi,
You would only be charged interest and penalty if you have a balance due on the 1040X. If you do not owe anything when you complete the 1040X you would not have any interest or penalty to pay.
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Customer reply replied 4 years ago

just to be sure that I have understood as example if I had refund 4000$ for my 2012 return and I amend this return and the result was to return 2000 $ to the IRS I would not be charged but if I they got more than 4000$ and then I will own them I will charged , Am I right ?

Yes you are correct, if you have any balance due on that 1040X then you will be charged interest and penalty.
The interest will rum from the original due date of the return.
You just need to send in the payment that shows on the 1040X and the IRS will then send you their calculation for any extra due. You can then send in the interest requested and ask that they "abate" any penalty assessed. This means you would not have to pay the penalty if your reason was accepted.
If you have never asked to abate penalty before, the IRS generally allows and will not ask for the penalty amount after your request to abate.
Robin D.
Robin D., Senior Tax Advisor 4
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Customer reply replied 4 years ago

so if they got part of the refund I wouldnot be charged , right ?

 

No, you have to actually request the abatement and then the IRS would say yes or no. You will have to pay the total interest that they say they want.
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