If a sold a car for a friend on ebay I'm I going to be taxed?

Question

$20,000.00 transaction. Money went to paypal, from there to my bank account, wrote him a check in less than 3 days.

Answer 1

If you didn't turn a profit on the transaction then there is no income and therefore no income tax due. Keep records in case you are asked. It would be a good idea to have a power of attorney from your friend as proof of what the transaction was all about.

That would have triggered at least two notifications to the Treasure Department so you want to have your ducks in a row if any questions are asked. As long as everything checks out there won't be any problems.

Answer 2

Not likely! However you do have a number of issues that could cause you to be taxed. Any time you sell a personal property you could have a gain which would be taxable. Some states may wish to collect sales tax from you via your pay-pal account. Your state also may require that you be licensed to have performed this transaction. And last but not least Homeland Security may wish to ask why you are providing this person with $20,000. However, if your personal income taxes are otherwise in order this is not likely to ever come to the attention of anyone such as the IRS or your state tax authority.

Answer 3

It depends on who had ownership of the asset.

If your friend had ownership of the asset then he/she will be the one who is subject to gain on the property if the money received exceeded the basis on the personal property.

If you were not the owner, then you should be in the clear as far as the car itself goes. However, if you did collect any fees from your friend for the sale, then you are to report those fees as income.

Essentially what you engaged in was a consignment transaction where a 3rd party sold an asset for a seller to a buyer.

Answer 4

What was the amount of the check you wrote your friend? If it was less than $20,000 then the difference is income to you.

Since it was not your car that you sold, any money you received is not capital gains. Your fee if any that you were paid is ordinary income subject to income tax plus self-employment taxes.

Answer 5

Probably not, since automobiles are sales taxed in the state in which they are eventually licensed. Nonetheless, keep clear records of this transaction, should any questions arise in the future concerning what you did.