So it's tax time, and although I missed the original discussion here:
http://classic.magictraders.com/ubb/Forum1/HTML/025261.html

I'd like to inquire as to whether or not the conclusions are the same if the intent is to write mtg off as a non-business hobby expense? Looking back through my records for 2011, I've done a good amount of buying and selling of mtg, primarily to complete my collection and sets, but there's been some churn in between so at the end of the year I find myself with some decent numbers both buying and selling cards, so I like to get an update on this, to see who else may be in the same situation and whether anybody took the plunge into actually writing off mtg as an expense, or if it is actually the case that

"It basically comes down to this if you plan to write the.expenses of your hobby off on your taxes go pay $20 for a business license take a small business class from SBA and learn some accounting otherwise be prepared to be audited "-BennyG111

Suppose I buy $20k worth of cards, and sell $10k worth, I'm holding $10k of cards still assuming no depreciation.
Expenses: $20k
Income: $10k

Do I have losses I can deduct?

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Originally posted by stu55:
You can deduct the net loss, not the expenses, but you have to make sure it is determined to be a hobby and not a business

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Originally posted by Dresden:
Mmm stu55, what's the difference?

Suppose I buy $20k worth of cards, and sell $10k worth, I'm holding $10k of cards still assuming no depreciation.
Expenses: $20k
Income: $10k

Do I have losses I can deduct?

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I think you should spend a lot of time learning the accounting fundamentals before you try to cheat the tax system.

edit:
If you bought a Candelabra of Tawnos for $300, and sold it for $100, then that is a loss.

If you bought 10 Candelabra at $100 each, and only sold one @ $300, with 9 left in your binder, that is not a loss.

edit 2:
And for all the Canadians who want to take advantage of this, there is a $1000 rule that rounds any transaction less than a $1000 to a $1000. So if you bought a mox at $350, and sold it for $500, the tax implication is:

Bought mox @ $1,000.
Sold mox @ $1,000.
= no gain/loss.

This is the same if you bought the mox @ $500 and sold it for $350.

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Originally posted by stu55:
You can deduct the net loss, not the expenses, but you have to make sure it is determined to be a hobby and not a business

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Wait, what? That doesnt really make sense.

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Originally posted by Dresden:
Mmm stu55, what's the difference?

Suppose I buy $20k worth of cards, and sell $10k worth, I'm holding $10k of cards still assuming no depreciation.
Expenses: $20k
Income: $10k

Do I have losses I can deduct?

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The main question here is whether you are a business or a Hobby. If you are a business, you won't get to show a 10k loss because the cards you purchased are inventory. You have to figure out your costs of goods sold to determine how much expense you actually have.

If you are a hobby, then you must show the 10k as income and you can deduct expenses on your schedule A equal to or less than the Hobby income that you claimed. Hobby income cannot be used to offset other income.

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Determining a cost basis for one card, np, determing it for multiple you are talking about not worth it for you.

I know many of you guys run a business with mtg, what I'm asking about is utilizing it as a hobby, NOT a business. Is it still a no-go? My collection system is pretty automated, so having a cost basis isn't really an issue. And from what I read online, can't I deduct hobby expenses (no more than income generated) via itemization? As long as the value is >2% of AGI, it'd be worth considering? Sorry if I'm beating a dead horse, just want to make sure what's doable and what isn't.

Edit: The more I read the more I'm unsure, and most of the examples I see online are a no-go due to tiny $ amounts so let me clarify.

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Originally posted by Montague:

Hobby income cannot be used to offset other income.

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This is a very important point that you shouldn't ignore. Unless you are expecting a lot of income from your hobby in the future, and you are planning to report all your income from selling your cards, this is definitely not worth the trouble.

__________________
MOTL Fantasy NBA 2010 Champion

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Originally posted by Speed Demon:
I would talk to someone who does your taxes before coming to an online message board when it comes to questions on your personal finances.

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Originally posted by dfitzg88:
as an accounting professional, this made me lol

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Apparantly there are 3 accounting professionals on the board. dfitzg88, myself, and stu has an MBA and some background in accounting. Generally the advice stu gives is correct.

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Originally posted by dfitzg88:
i wasnt laughing at your question, just the heaping mound of wrongness people posted, probably after doing a quick google search and getting confused.

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