IRS tax question with scrap loss

[Pike1990]

I bought $7000 worth of copper wire from gov liquidation. It turned out to be copper coated wire and worth tin price. I lost 6800 bucks on this. I am a new scrapper and wondered if this could be considered a loss in the IRS tax world. I use turbo tax and would welcome any advise on how I can turn this loss into some tax relief. I work a full tome job and have the scrap as a part time business. Thanks for any advise.

[PartTimeScrapper]

I would say that's a loss. Im n tax expert but I would call that a loss. Now the question is did they list it on the auction as copper wire? If they did I would think they would be liable.

[ryanw]

You will have to file as a business on your taxes. This opens up a whole new area of taxes and forms if you haven't done this already. There should be somewhere that figures cost of goods sold and income from goods sold. I would think it would be as simple as that.

[Pike1990]

They did and I went through the appeals process. They showed me the user agreement that was 30 pages long. Yes I agreed to the bidding terms and it was advertised as copper wire. Got it to the yard and the magnet stuck to it. I still have the wire loaded on one of my trailers and this happened almost a year ago. Internet auctions are not the same as auctioneers. They do not live by the same rules. Lesson learned on magnet, even if it says copper wire.

[Pike1990]

Ryan, I am going to look at that. Thanks

[ryanw]

Oh, I wanted to mention that I am no tax expert. I'm just trying to point you in the right direction from my experiences. Since it is still in your possession, it is still inventory, and you should not be able to claim it as a loss on last year's taxes. You'll have to sell it to claim the loss. Also look into this raising the possibility of an audit from a large loss such as this.

[Pike1990]

Ryanw, great advise. I did not even think of that. Thanks

[JohnC4X4]

It is all part of your schedule C

[Bear]

If they misrepresented it, doesn't seem like any number of pages would correct their error in advertising

[Mechanic688]

They did and I went through the appeals process. They showed me the user agreement that was 30 pages long. Yes I agreed to the bidding terms and it was advertised as copper wire. Got it to the yard and the magnet stuck to it. I still have the wire loaded on one of my trailers and this happened almost a year ago. Internet auctions are not the same as auctioneers. They do not live by the same rules. Lesson learned on magnet, even if it says copper wire.

They would be getting a letter from My attorney and I would file a complaint with the BBB and the attorney general of the state they are operating out of. That is flagrant "false advertising" and being that you paid so much that is considered a felony. I da*n sure would not have waited a year to do something.
Remember, the squeaky wheel gets the grease. Hell, I filed charges with a county prosecutor when a Escap buyer bounced a check on me,,,

[zito]

I'm pretty sure that in the small print somewhere will be written something along the lines of "all information in this listing is given as a guide only, and is in no way guaranteed to be complete or accurate. You must do your own research and investigate all lots yourself, to your own satisfaction, before bidding". That's pretty standard here at any auction. However, if you weren't allowed to preview anything, that all changes. By all means, speak to a lawyer. But maybe even more importantly, speak with an accountant. You should definitely be able to write that loss off.

[GeorgeB]

They would be getting a letter from My attorney and I would file a complaint with the BBB and the attorney general of the state they are operating out of. That is flagrant "false advertising" and being that you paid so much that is considered a felony. I da*n sure would not have waited a year to do something.
Remember, the squeaky wheel gets the grease. Hell, I filed charges with a county prosecutor when a Escap buyer bounced a check on me,,,

**** straight!

I'm pretty sure that in the small print somewhere will be written something along the lines of "all information in this listing is given as a guide only, and is in no way guaranteed to be complete or accurate. You must do your own research and investigate all lots yourself, to your own satisfaction, before bidding". That's pretty standard here at any auction. However, if you weren't allowed to preview anything, that all changes. By all means, speak to a lawyer. But maybe even more importantly, speak with an accountant. You should definitely be able to write that loss off.

The right lawyer can always find loop holes. This is why, when it comes to this particular auction, NEVER bid unless you can inspect it.

Just because someone is selling it, does NOT mean they know what they are selling.

[Mechanic688]

I'm pretty sure that in the small print somewhere will be written something along the lines of "all information in this listing is given as a guide only, and is in no way guaranteed to be complete or accurate. You must do your own research and investigate all lots yourself, to your own satisfaction, before bidding". That's pretty standard here at any auction. However, if you weren't allowed to preview anything, that all changes. By all means, speak to a lawyer. But maybe even more importantly, speak with an accountant. You should definitely be able to write that loss off.

I understand but they can hide all they want in the fine print but if you cannot physically check the stuff out due to being too far away or working your day job, then I'd file it with the small claims court of your county and let the judge decide.

You have to go by their listing and are assuming it is accurate. Anything else is misleading and false advertising. Believe me, I'd win my case.

[KzScrapper]

If your using Turbo Tax try plugging in the numbers and see how it plays out, you can always go back and change it before you file...you will need the business version though. Depending how many years you have been in business and profits shown over the years your loss will be subject to limitations.

Disclaimer: Not a expert either and individual results may vary.

[Russell]

Schedule c (as John said) if you are a sole proprietarship. Consider an LLC or incorporate.

[cobre collector]

Another thing that would be on your side is that you were not the only one that was led to believe that is was solid copper wire. I'm sure there were several people bidding to get the bid that high.

[volvoscrapper]

as Russell & JohnC said, it would be included cost of goods sold on your schedule c, specifically, part of whatever total you put in line 36. If you don't track inventory you would include it with your "other" expenses in Part V, to be totaled on line 48.

if you don't file a schedule c you might want to take this one on the chin

[jghilino]

it wont look good in the irs eyes if you are setting up a company just so you can file a loss, red flags galore, take the hit and move on or risk an audit by claiming it

[beedubz]

I can't believe you would bid 7k on something without a visual inspection... That's a great lesson for everyone on here.

[AuburnEwaste]

You do not have to have an actual business to use a schedule C form. If you have income that needs to be reported, and expenses involved with bringing you that income, you can file a schedule C. The 7000.00 you spent is an expense on the schedule C. You do not have to claim it as a "loss", because the math works itself out.

Example:

Say you bought it for 7000.00, and sold it for 9000.00. You would claim 7000.00 as an "other expense" (buying inventory), and the 2000.00 would be added to your income. You would be taxed on the 2000.00 and whatever other income you had.

In your case, you spent 7000.00 and sold it for 200.00. The 7000.00 is still an expense, and the 200.00 is added to your income. Since all of your expenses are lumped together, and all of your income is lumped together, the 7000.00 is a deduction from the remaining income. It is hard to explain but the math works out.