Just thought some of you might be interested in the difference of definitions as designated by the IRS relative to our "hobby"

* DEALERS IN COLLECTIBLES are those engaged in the trade or business of selling items, primarily to customers. They report ordinary income or loss on their sales.

* INVESTORS but and sell items primarily for investment--rather than for personal use and enjoyment. They report caapital gains and losses on their sales.

*COLLECTORS buy and sell items primarily for personal pleasure and are neither dealers nor investors. They report capital gains reduced by capital losses o sales but losses in excess of gains are not deductible.

With the opportunity for collectors to sell their wares on a regular basis at on-line auction sites, some may be crossing the line into dealer status--and a higher tax rate--without even knowing it.

WHAT MAKES SOMEONE A DEALER, INVESTOR, OR A COLLECTOR?

A dealer is someone in the business of buying and selling collectibles. This generally is determined by the frequency of sales and other factors that indicate a business. Usually, a dealer buys and sells items with a short turnover.

A collector, on the other hand, is someone who makes an occasional sale of something held for a long period of time.

An investor is someone inbetween and the IRS looks at numerous factors to determine if investment is the primary motivation.

*CAUTION: Dealers may also be liable for self-employment tax on their net earnings arising from self-employment.

I, as well as other CPA's on this board are, of course, privy to more detailed information on this subject (which by the way is accessible to any taxpayer if he wished to research it), but my purpose here is just to give you a slight exposure of potential liabilites that the IRS might impose upon any taxpayer at any time.

Without offering any opinion, I would just like to alert the collectors who sell their chips on Ebay and other auction houses to keep accurate records of their cost of each chip sold, along with the date purchased. The source might be another piece of information you should keep. Under normal circumstances,THIS MUST BE KEPT FOR THREE YEARS.

Many of you may not be aware of the fact that many large corporations, ones that generate hughs sales, provide special space for IRS auditors that are assigned to specific corporations on a full time basis to audit their books. These agents go to work at the corporate offices or other corporate locations every day just as if they were employed by the corporation.

It is for this reason, that IMHO, it is inevitable that sellers on Ebay are going to have to account for their sales, and it won't be just for the current year audited.