General Forum

I occasionally will buy cards that I find in person that I know I can sell for a profit online. Additionally, there have been two instances where I purchased a card soley as an investment. Unfortunately, since PayPal and other online payment companies started 1099ing online sellers, taxes are now on the table. (They technically should have been from the start, but let's ignore that) After some research, it appears that, at least on a federal level, it is relatively straightforward on how you report any profits (or losses) of cards you bought individually.

• For cards you hold for longer than 1 year, this is considered a long term capital gains, to be reported on Schedule D. 
• For cards you hold for less than a year, this is considered short term capital gains, also to be reported on Schedule D.

However, I am running into a new dilemma. What about cards I pulled from packs? I can't simply report the price I paid for the pack as the price I paid for that card, as I might receive other cards in that pack I might later sell, and let's be honest, no one is opening packs for investment purposes. (At least, no sane individual is.)

The only option this seems to leave is to report those sales as hobby income, which is horrible because you are not allowed to write off hobby expenses. For example, if I bought a $100 box of cards, and sold one $50 card from that box, I must pay tax on the $50 at my current tax bracket, and I cannot write off any of the $100 whatsoever. 

My question is this: is there some other way to report sales of cards I pulled from packs such that I can somehow write off the price of the pack? My gut is telling me no, but was curious if anyone else might happen to know a loophole or something.

as you write, either it's a hobby or it's a business.  You have to decide which way you want to go and then that sets all the rules you have to follow.

As for a basis for a card from a pack, the IRS will look at consistency in method. In this case you can value card based on the # of cards per pack against the cost of the pack (example 40 cards/$4 per pack = $.10 per card). Of course, what you mention and how your reportable work out make a difference on what you may do, but if your ar worried about a basis for a crd from a pack, there is a working example.

For the Canadian "spin" on this question - we don't have a differentiation between short term and long term capital gains, but the importance is the distinction between whether it is a capital gain or business income. There are a number of criteria to look at to help determine whether a transaction is considered a capital gain or business income, and best that anyone in the situation review the rules in detail and consult a tax professional (individual facts are very important in figuring the right treatment).

If the conclusion is that it is a capital gain, Canada does have "personal use property" rules which can have implications. For example, is I have a small collection of baseball cards for personal enjopyment which I spent $200 on, and eventually sell the collection for $800 - the personal use property rules "bump" any proceeds or cost amount below $1,000, up to $1,000. So instead of having a $600 capital gain, proceeds of $1,000 and cost of $1,000 are reported and there is no capital gain (so no tax). There are even more specific "listed personal property" rules to be aware of depending on the type of items involved (don't appear to impact baseball cards, but could impact other collectibles).

If the conclusion is business income, I'd also just say - make sure to consider sales tax implications. I know these differ greatly between Canada and the US on implication/registration, etc.

That all being said, the "cost" aspect is straightforward and as noted, the cost base for the card (whether sold for a capital gain, or held as inventory and sold in a business), would be as noted - if you buy a 40 card pack for $4, the cost base for each card in the pack is 10 cents.

Unless you make $25 k in profit or it is officially a business, selling a card is like selling your personal car.  Check with a cpa, they can help clarify.

I know in Canada, you can run a small business out of your home and therefore deduct a percentage of your home costs (utilities and municipal taxes) on your income tax returns.  You do have to register the business and declare how much of the home is dedicated to the business (percentage of area).

I have inquired to my tax guy to see if this is a possibility for me as I have recently started selling cards on FB and have actually made a decent amount of sales.  My costs of the home would easily exceed what I have sold so I would actually get money back in my tax return because of it.  The question is, how long can you operate without showing a profit?