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DeluxeXL t1_j25rpwy wrote

Generally, you "inherit" the cost basis from the gift donor. Read this caveat.

> 1. My brother buys me a laptop in 2018 for $1,000 using HIS credit card > 2. I use the laptop for 4 years > 3. I sell the laptop in 2022 for $750 and keep the money

Since donor's cost basis (step 1) and FMV at time of gifting (step 1) are identical, use $1,000 as the cost basis of your sale (step 3). Capital loss of personal use item is not deductible. Reporting is generally not required for selling personal items at a loss in a non-business setting.

If reporting is desired, on Form 8949, enter $750 as sale proceed, $1000 as cost basis, and $250 as adjustment (code L) so the subtotal is $0 (no taxable gain and no deductible loss).

Note: If you run a business, you cannot just turn your own personal-use item into a business inventory just so you can deduct it.

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beckagrosst OP t1_j25tisc wrote

Thanks for this. I do NOT operate a business. To clarify, the items sold are items that I am getting rid of from my home, such as selling old clothes or old electronics. My brother gifted me the laptop for a birthday years ago, I used it for personal use (school etc), and sold it this year so that I could buy a new laptop. I never paid for the laptop, but I kept the money from the sale.

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compounding t1_j273tr0 wrote

Ya, that’s fine. The cash from selling the item later is part of the gift your brother gave you as long as it didn’t appreciate in value since then.

He can give you up to $13k worth of gifts per year without any tax implications at all and just file some record keeping forms for up to millions after that.

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