Looking for tax advice ..............

[blueline]

Does anyone know if Revenue Canada can tax a person who sells personal possessioins, items that have been in their personal collection for years, yard sale type items, etc.?

This relates to selling on ebay, which I have done for several years and roughly 90% of what I have sold has been from a massive collection of memorabilia that I have accumulated and inherited over many years. Much of this stuff dates back to the 1950's.

Anyways I began unloading much of it over the years and had always been under the impression that selling your own items does not have to be declared as income, thus you do not get taxed on it.

Well, some people will now know that ebay has been ordered to comply with Revenue Canada's request to turn over info on its Power Sellers dating back to 2004-2005. That has a lot of sellers, me included, scrambling to go through our records and wondering if we are going to have the tax man knocking on our doors. The info I have received from a former tax department employee, who is now an ebay seller, is that if it can be shown that a person is selling personal 'stuff', the money received will not be taxed.

Can anyone confirm that this is true?

 

[blueline]

By law your suppose to report all income..

If rev canada for some reason wanted to audit you they could, and tell you to pay back taxes..

Ive sold on ebay for the last 7 years, never been bugged.

If you are or were a Power Seller, all of your info will be turned over as of next week.

I know what you are saying about reporting all income and I have no problem with that. There is just a lot of uncertainty among a lot of us when it comes to reporting income from a business. For many people ebay has been a hobby, a way to unload unwanted items, I buy a lot and sell a lot. If I considered this to be a legit business and started writing off overhead, CRA would end up owing me money, that's how ridiculous this is. However, as I mentioned, a former taxation department worker swears up and down that CRA is not going to bother you for selling a few boxes of hockey cards that you have had since you were seven years old, old clothes that you can no longer wear, toys your kids no longer use.

Same thing if I have a yard sale and made $1000 selling old junk. Or sold a used washer and dryer for $1200. That is considered income and thus I must report it otherwise face a penalty? I just find that hard to believe. I want to believe this former taxman but was just wanting to know if anyone else has any experience with this sort of thing.

 

[fuji]

The entire amount of the sale isn't taxable but any gains would be. So if you bought something for $10 and sold it for $20 in theory you have a capital gain of $10. You pay tax on half your capital gains, so you'd owe tax on $5 in this example.

Not sure how CRA would treat this because it's pretty unlikely that you know how much you paid once upon a time so it's possible they'll just ignore it.

Do you have records of how much you paid for these items originally, or what their value was at the time you inherited them?

 

[blueline]

The entire amount of the sale isn't taxable but any gains would be. So if you bought something for $10 and sold it for $20 in theory you have a capital gain of $10. You pay tax on half your capital gains, so you'd owe tax on $5 in this example.

Not sure how CRA would treat this because it's pretty unlikely that you know how much you paid once upon a time so it's possible they'll just ignore it.

Do you have records of how much you paid for these items originally, or what their value was at the time you inherited them?

None whatsoever. As I say, this stuff consisted of hundreds upon thousands of items like souvenir hockey pucks from years back, scrapbooks full of old photos, sports cards, game programs (well over 1000) old magazines back as far as the 50's along with newer items of course that I have gathered up from yard sales, flea markets, etc. I get to the point every so often I get sick looking at an item so I get rid of it. I used to go to many, many different sporting events over the years and always came home with a bag of stuff that I have kept for many years. So no, there are no receipts for anything.

This 'taxman guy' says that during an investigation, CRA will be looking for money spent from your bank accounts, credit card transactions, paypal account, etc to show purchases of items that were later sold. In my case they won't find anything. He also said these people will use common sense when they do an audit and if they don't feel you are running a business, if they see items resembling personal 'stuff' they aren't going to bother you.

I have managed to get copies of all of my ebay transactions from 2004-05 and from what I am told by ebay, that is the same reports CRA will receive. Every item sold is shown with the description. So all they will see are hockey pucks, baseball cards, hockey programs, newspaper clippings from scrapbooks, tons of old magazines, etc. As I said, I hope this guy is right, but I am not sure he would mislead all of us.

 

[warren buffet]

Can you ask your friend what he believed will happen if the years are statute barred, will they still look, I am curious what will be done.

 

[fuji]

So it'll boil down to how much selling you did.

I mean what's the honest answer here, were you doing this as a business? Were you going around and buying stuff at flea markets and garage sales with the intention of selling it at a profit on eBay eventually? If so you're guilty and then the question is whether CRA can actually figure it out which is another story--but you'd have to be worried they would.

Personally it's hard to imagine that you became a power seller by cleaning out your garage. That is a lot of selling. I guess anything is possible though.

If you KNOW you have something to hide you can file what is called a voluntary disclosure, which is where you go to CRA and admit you've been bad and you owe tax. Then you pay the tax plus any interest on the tax.

By doing that you avoid penalties, which can be very steep: Penalties on unpaid taxes can double the tax bill.

If you really have nothing to hide then don't sweat it.

 

[blueline]

Can you ask your friend what he believed will happen if the years are statute barred, will they still look, I am curious what will be done.

Well he is not a friend, he is just an ebayer who posts on the discussion board, much like we do here. I can leave a post for him, no guarantee when he will get back with a reply though. He seems to pop up every now and then but has been around a lot lately since there have been tons of questions about this ruling that has just been passed.

 

[squash500]

Well he is not a friend, he is just an ebayer who posts on the discussion board, much like we do here. I can leave a post for him, no guarantee when he will get back with a reply though. He seems to pop up every now and then but has been around a lot lately since there have been tons of questions about this ruling that has just been passed.

IMHO, even if you do get audited then wouldn't you get the opportunity to write off all your business expenses? You could write off such things as a home office, your computer, your desk, maybe some car expenses---who knows?

 

[blueline]

So it'll boil down to how much selling you did.

I mean what's the honest answer here, were you doing this as a business? Were you going around and buying stuff with the intention of selling it at a profit on eBay eventually?

If so you're guilty and then the question is whether CRA can actually figure it out.

Personally it's hard to imagine that you became a power seller by cleaning out your garage. That is a lot of selling. I gues anything is possible though.

Actually it is not difficult at all. You just have to average a minimum of $1000in sales for three consecutive months. With the thousands of items I had and still have, 1000/month is easy. Think about it, I had thousands of cards, many older ones, rookies, over 1000 pucks alone, I still have hundreds of old hockey programs, yearbooks and media guides even after selling tons of them. Think of what an old hockey scrapbook with tons of old clippings and photos from the 1950's would sell for. That was rare stuff, you can't find that down at the local collectibles shop, people go nuts over stuff like that. My brother and I collected pocket schedules and together (his and mine combined) I be there were 15-20 binders full of them (so thousands of schedules in total). Any duplicates were sold off and again, any rare older ones could sell for a lot of money. Sell 40-50 older hockey cards including a Gretzky rookie and a few Gordie Howes from the 1950's and you will soon meet the minimum requirement for being a Power Seller.

The thing is, I only maintained the status for a short period of time, but because I was a PS during the 2004-05, my name is on record and will be submitted along with all the others. I had a stretch of maybe consecutive six months where I topped the 1000 mark, when I sold a lot of high end stuff. The other months, pretty much right up today, I was substantially under the required minimum. I lost my PS seller status back in 2005.

 

[shakenbake]

hey Blueline;

Perhaps this would be useful to you. It is for GST. However, it might also apply to capital gains and similar issues. Check this website, http://www.cra-arc.gc.ca/E/pub/gm/g400-3-9/g400-3-9-e.html

And I quote from a GST Memorandum "G400-3-9 Capital Personal Property (GST 400-3-9)"

"Sale

23. Where a registrant sells capital personal property and immediately before the sale the registrant was not using the property primarily (generally more than 50 per cent) in commercial activities, then the sale shall be deemed not to be a taxable supply. As a result, tax will not be charged on the sale.

Example

If the computer discussed in paragraph 22 of this memorandum was later sold for $500, no tax would be collectible or remittable on this sale."

So, i fyou weren't using the stuff in a busioness, I would assume that, at least, no tax would be due.

 

[blueline]

If you KNOW you have something to hide you can file what is called a voluntary disclosure, which is where you go to CRA and admit you've been bad and you owe tax. Then you pay the tax plus any interest on the tax.

By doing that you avoid penalties, which can be very steep: Penalties on unpaid taxes can double the tax bill.

If you really have nothing to hide then don't sweat it.

See that is my problem. Do I have something to hide? I don't know. If this former taxman is correct in saying CRA will be able to determine that I am selling 'personal stuff' and will leave it go, then I have no worries. However, if I find out that he is incorrect and CRA is going to consider this as unreported business income, tax and penalize me accordingly, then of course, I will step right up and do what I have to do before I get a knock on my door.

I was actually advised by someone to contact DioGuardi, the well known Tax Lawyers in the GTA about my case. I filled in an online request for info and gave him a coles notes version of my concern, without going into a lot of detail and his response was that I had committed fraud and could be looking at possible jail time......lol....... As I said, I didn't give much detail as there was only so much space to type any text. So I sent back a follow up email with a lot more detail, gave an estimate of what kind of money we are looking at, told him what kind of things I was selling and there was no reply. So maybe he figures I am not a big time crook afterall and representing a guy who sold a few thousand hockey cards and flea market type items isn't worth his time.

As I mentioned in an earlier post, way back in the day I always had the belief that selling 'personal stuff' was not subject to taxes. This guy keeps hammering that point across to everyone.

 

[blueline]

hey Blueline;

Perhaps this would be useful to you. It is for GST. However, it might also apply to capital gains and similar issues. Check this website, http://www.cra-arc.gc.ca/E/pub/gm/g400-3-9/g400-3-9-e.html

And I quote from a GST Memorandum "G400-3-9 Capital Personal Property (GST 400-3-9)"

"Sale

23. Where a registrant sells capital personal property and immediately before the sale the registrant was not using the property primarily (generally more than 50 per cent) in commercial activities, then the sale shall be deemed not to be a taxable supply. As a result, tax will not be charged on the sale.

Example

If the computer discussed in paragraph 22 of this memorandum was later sold for $500, no tax would be collectible or remittable on this sale."

So, i fyou weren't using the stuff in a busioness, I would assume that, at least, no tax would be due.

Thanks for that. I just want to believe that what I read from that fellow from ebay is true, but I guess I just need more proof. Oh well, if I get audited and end up owing back taxes, I still have tons of stuff left to sell on ebay to pay the tax bill.

 

[fuji]

Sounds like you should skip the email and sit down with a tax lawyer for real and get some sound advice.

If you file the voluntary disclosure before they notice you, then you'll be able to come clean and pay your taxes without any penalties or charges.

Once you get "the letter", though, it's too late--at that point the voluntary disclosure route is no longer available to you, because it is no longer considered voluntary.

 

[shakenbake]

See that is my problem. Do I have something to hide? I don't know. If this former taxman is correct in saying CRA will be able to determine that I am selling 'personal stuff' and will leave it go, then I have no worries. However, if I find out that he is incorrect and CRA is going to consider this as unreported business income, tax and penalize me accordingly, then of course, I will step right up and do what I have to do before I get a knock on my door.

I was actually advised by someone to contact DioGuardi, the well known Tax Lawyers in the GTA about my case. I filled in an online request for info and gave him a coles notes version of my concern, without going into a lot of detail and his response was that I had committed fraud and could be looking at possible jail time......lol....... As I said, I didn't give much detail as there was only so much space to type any text. So I sent back a follow up email with a lot more detail, gave an estimate of what kind of money we are looking at, told him what kind of things I was selling and there was no reply. So maybe he figures I am not a big time crook afterall and representing a guy who sold a few thousand hockey cards and flea market type items isn't worth his time.

As I mentioned in an earlier post, way back in the day I always had the belief that selling 'personal stuff' was not subject to taxes. This guy keeps hammering that point across to everyone.

Of ocurse, he would say that. It's in his best ineterests to tell you that and his way of drumming up business.

 

[blueline]

Sounds like you should skip the email and sit down with a tax lawyer for real and get some sound advice.

If you file the voluntary disclosure before they notice you, then you'll be able to come clean and pay your taxes without any penalties or charges.

Once you get "the letter", though, it's too late--at that point the voluntary disclosure route is no longer available to you, because it is no longer considered voluntary.

Well that may be the way to go.

 

[fuji]

Actually maybe just sit down with a good accountant (like a CA) and get their professional opinion on whether you owe tax. That's the real question here. It'll be cheaper than a lawyer.

If they say it's taxable file the voluntary disclosure.

 

[Fred Zed]

IMHO, even if you do get audited then wouldn't you get the opportunity to write off all your business expenses? You could write off such things as a home office, your computer, your desk, maybe some car expenses---who knows?

I think that is correct. Since it seems the ebay business is operated
from home blueline would be eligible for the home business tax credit which
is quite generous. I am not a tax expert but my guess is the income from ebay sales
ought to be reported. If you are concerned about it you should consider
asking a lawyer to contact CRA anonymously on your behalf. Once the lawyer
gets a reply from CRA you can then take it from there.

 

[jeeperz]

As someone mentioned earlier the key question is whether you were in the 'business' of selling goods, be they your personal items or what have you.

This example may help to clarify: If you were to sell your personal vehicle during the course of the year, there is no need to declare the capital gain or report the income. However, if you sold 10 'personal' vehicles over the course of the year it could be argued that you were in the 'business' of selling vehicles and then the profit should be reported as business income.

To answer your questions about expenses anyone running a business is entitled to claim them and one can even claim employment expenses in certain situations. As to office in the home expenses you could claim a portion of your home as an expense but you'd have to demonstrate that you had a space devoted to the business and it should be reasonable, ie. 10-20%.

I wouldn't bother with a tax lawyer, waste of money in my opinion. Decide whether you were in 'business' and either file a voluntary disclosure/adjustment or just hunker down and hope your number doesn't come up.

Your scenario is much like someone having a garage sale. Obviously the tax authorities aren't going to run around taxing people hosting garage sales. A waste of resources for such small fry. But if you had Honest Ed's happening in your driveway every day, someone might tip-off Johnny tax Law.

Good luck!

 

[Fred Zed]

........

81(10)

eBAY

It was reported in the Globe and Mail that CRA have won a Federal Court Order requiring eBay Canada Ltd. to turn over the names, addresses, phone numbers and e-mail addresses of all high volume sellers on its website.

CRA is checking to see if the sales were reported on the 2004 and 2005 tax returns. CRA noted that it is targetting people who qualified for eBay’s Power Seller Program in 2004 and 2005.

http://www.canhamrogers.com/TaxTipsQ12008.htm

 

[fuji]

To be a power seller you have to sell >1200 items per year and consisntly more than 100 per month. That's a lot of garage sales.