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Anybody ever noticed this gem: from IRS pub 525 “Taxable & Nontaxable Income”/”Other Income”?:
“Found property.
If you find and keep property that doesn’t belong to you that has been lost or abandoned (treasure trove), it is taxable to you at its fair market value in the first year it is your undisputed possession.”Might that also apply to items scavenged from roadside, dumpster, etc?
I’m not going to sweat it, but if an IRS auditor asks why I haven’t reported my found goods as income, I think I’ll just say they were gifts, which are not taxable as income.
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Sure, that kind of logic worked out for Wesley Snipes:
https://en.wikipedia.org/wiki/Wesley_Snipes#Income_tax_conviction -
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OK, but facetiousness aside, who’s reporting found items as income? Are you, and Ryanne, Jay? And if you do, you’re OK being taxed a second time when you sell them?
Seriously, I’m curious. I’ve scavenged thousands of dollars of items over the years that would have gone to the dump. Heck, we should get waste reduction tax credits!
And if someone posts a curb alert on Nextdoor or CL, or puts items on the curb in plain view next to their trash can for easy of scavenging, what would you call that if not a gift?
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This is mostly meant, I think, for those people who “find” items of significant value, like gold doubloons buried in their backyard, etc. (hence the “treasure trove” reference). If you find a nice pair of shoes in the trash and re-sell them for a profit, you are being taxed on the profit, so the IRS is satisfied. I guess you could technically report them as income at whatever value they’re worth, and then your offset would be that you made no profit on them when you sold. The net tax effect is the same but it’s a weird way to do things. If you find a nice jacket and keep it for yourself, yeah, that’s technically “income”, I suppose, since you got something for nothing, but the IRS really does not care as the value is de minimis. If, on the other hand, you found $10K in the pocket of that jacket, then yes, in a perfect IRS world, you should report that on your tax return as income.
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Thanks redux, I think you’re correct about the de minimis consideration, which is why I say I’m not sweating it. But if challenged in an audit, I certainly would try the gift arguement.
Still, I think it’s a fundamemtal question, for scavengers, that has some interesting ramifications. For instance, I snagged a perfectly functional 44″ Samsung flat-screen TV off the curb 3 years back. Now, if I’d gone to the person’s door, given them a penny, and received a receipt for the sale of the TV, it would seem I wouldn’t be responsible for income tax on the TV (although the state might want some use tax). So is the market value of a TV on the curb 1 cent?
Just to clarify, I’m a very pro-government, pro-social-wefare state kind of person, so I’m not questioning the rule from a libertarian, tax protester standpoint; I just think it’s an odd sort of rule that, if consistently enforced even in de minimis cases, would be a disincentive to the positive social outcome of waste reduction, and well-crafted tax policy should always aim to maximize positive social outcomes and minimize negative ones.
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The way I rrad the rule, you have to report the item as income in the first year you own it. It says nothing about selling the item, so it seems to suggest, as junque redux says, that you’d report income from the acquisition of a found item at a “market value”, then use the tax you paid on the “income” as your cost when you do sell it. Seems like a PITA, so that’s why I’m curious if folks are familiar with the rule and if they’ve made peace with it somehow. It’s true it makes parenthetical reference to “treasure troves,” but where’s the definition of treasure trove? Is it a lot? Sounds like a lot, but how much is a lot? Throw me a bone IRS!
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I guess Ryanne better report to the IRS that McDonald’s burger she found on the road and ate!
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But road burger is expensable as a business meal, so it cancels, right?
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Some further reading:
https://en.m.wikipedia.org/wiki/Cesarini_v._United_States
https://en.m.wikipedia.org/wiki/Commissioner_v._Glenshaw_Glass_Co.
https://www.law.cornell.edu/cfr/text/26/1.61-14
https://en.m.wikipedia.org/wiki/Treasure_troveThe IRS seems to define a “teasure trove” as any found item that can by valued in US currency, even if it is not actually liquidated. I find no reference to a minimum value that would support the claim that some found items represent de minimis income, though in practice the IRS may well treat it that way. Probably depends on the fraction of total income and how compliant and rigorous you are in other areas.
DISCLAIMER: I’m not a tax accountant, lawyer, or expert in any way; I’m only speculating!! And as Jay reminds us: it’s probably not a good idea to get your tax advice from random people on the internet.
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