Does the sale of personal items need to be declared as income on my income taxes?

Question

I have been selling some books that I own. I am selling them at a loss (less than I bought them for and less than market rate). However, I have gotten about $1,400 in income minus $400 for shipping the books. Do I need to declare this as income on my taxes? I live and pay taxes in Canada.

Answer 1

Books would be considered Personal-Use Property according to Canada's income tax laws. The most detailed IT I was able to find is IT-332R, which says:

GAINS AND LOSSES

3. A gain on the disposition of personal-use property is normally a capital gain within the meaning of paragraph 39(1)(a). Where the property is a principal residence, the gain > is computed under paragraph 40(2)(b) or (c).

4. Under subparagraph 40(2)(g)(iii), a loss on a disposition of personal-use property, other than listed personal property, is deemed to be nil. [...]

This part of the bulletin indicates that a gain might be considered a capital gain - not income. However, you don't get to book a loss as a capital loss. This is the first hint that your book sale - which is actually an exempt capital loss - shouldn't go on your tax return unless it's one of the "listed" items:

LISTED PERSONAL PROPERTY

7. Listed personal property is defined in paragraph 54(e) to mean personal-use property that is all or any portion of, or any interest in or right to, any

(a) print, etching, drawing, painting, sculpture, or other similar work of art,

(b) jewellery,

(c) rare folio, rare manuscript, or rare book,

(d) stamp, or

(e) coin.

So unless you're selling rare books, the disposition (sale) of them is essentially exempt as income, regardless of whether you sold it at a profit or at a loss. If it is rare, then you might be able to consider it a capital loss, which doesn't help you much unless you had other capital gains, but you can carry over capital losses to future years.

There's also a newer IT related to hobbies and "collecting" items, IT-334R2. This one says:

11. In order for any activity or pursuit to be regarded as a source of income, there must be a reasonable expectation of profit. Where such an expectation does not exist (as is the case with most hobbies), neither amounts received nor expenses incurred are included in the income computation for tax purposes and any excess of expenses over receipts is a personal or living expense, the deduction of which is denied by paragraph 18(1)(h). On the other hand, if the hobby or pastime results in receipts of revenue in excess of expenses, that fact is a strong indication that the hobby is a venture with an expectation of profit; if so, the net income may be taxable as income from a business. The current version of IT-504, Visual Artists and Writers, discusses the concept of "a reasonable expectation of profit" in greater detail. Where a hobby consists of collecting personal-use property or listed personal property, dispositions should be accounted for as described in the current version of IT-332, Personal-Use Property.

(emphasis mine)

In other words, if it's not the type of thing where you'd make a tax deduction when you bought it in the first place, then you clearly don't need to report it as income when you sell it.

Just to be absolutely clear here: The fact that you are selling them at a loss is not actually what's important here. What's important is that, if the books aren't collectibles, then you would have had no expectation of profit. If you did have that expectation then you could have made a tax deduction when you first purchased them.

So in this case, it is probably not necessary for you to report the income; however, for the benefit of other readers, in some cases you might need to report it under "other income" or book it as a capital gain/loss, depending on what those personal items are and whether or not you made a net profit.

Answer 2

I doubt it. In the States you would only owe tax if you sold such an item at a profit. "garage sales" aren't taxable as they are nearly always common household items and sale is more about clearing out one's attic/garage than about profit. Keep in mind, if I pay for a book, and immediately sell it for the same price, there's no tax due, why would tax be due if I sell for a loss?