I want to start making pokemon investing content on my YouTube channel -
I think this would give me legitimate reason to write my Pokemon card purchases off as expense, especially if I plan to flip some for profit.
Is anyone doing this? Having the cards owned by your company rather than personal?
If yes, does the immediate acquisition of a card count as a business expense the same year it’s acquired?
EX: If you have a business profit of 400k, and you take that profit and acquire pokemon cards with it, can those be expensed to bring your profit down to say 200k?
I know this is a convo for a CPA, but I figured some of you have in-the-trench experience.
Everyone should be doing this in 2022 with the upcoming changes to how reselling will be reported on taxes ($600 fed threshold instead of 200 item & $20,000 at fed level).
Accrual accounting means revenue and expenses are recognized and recorded when they occur, while cash basis accounting means these line items aren’t documented until cash exchanges hands. … The accrual method is the most commonly used method, especially by publicly-traded companies as it smooths out earnings over time.
In summary; the expense/COG is realized when the item is purchased or when the item is sold. Up to you which you want to do.
Personally I write off the cost of the item when it’s sold. To answer some of your question, if you sell 400k worth of items in 2020 (let’s assume its all profit), then take 200k and buy other items in 2020. In 2020 youre going to pay taxes on 200k because Your 200k is an expense at the time of purchase (if you are doing accrual accounting), but let’s say you then sell that 200k of inventory in 2021 for 300k. You’re going to pay 300k of taxes on all that profit because you’ve already expensed the 200k you’ve purchased it with.
**speaking from personal experience. This is not tax advice from a professional. **
One way or another your paying the taxes. As a business it shouldn’t matter if you purchase a bunch at year end to offset taxes. Doesn’t work that way. You only pay taxes on the goods you sell. If you buy 100k and sell it all in the same year for 400k - then you pay taxes on the 300k in profit (the 100k is accounted for). If some of it remains unsold then it is classified as inventory. So if you buy 100k at years end to offset that year’s taxes - it won’t because those goods aren’t sold yet - they are now inventory until sold at which point they become part of cost of goods sold.
You can start a youtube channel and run it as a business but very very careful about playing any tricks. Any expenses you incur for the business must be directly related to the business.
A lot of the stuff you’re talking about I would say falls under the “grey” area of the tax laws. Sure, you could argue something like buying booster packs and opening them on the channel is directly related to production of the content but I’m not sure how it would be viewed under audit. If the auditor is clueless about pokemon TCG then I guess they would just assume that most of the cards are worthless after opening and just allow the deduction to pass through.
For inventory, you use form 1125-A which is filed with your schedule C. My understanding is that small businesses must use accrual method of accounting for inventory; therefore you’re not allowed to deduct purchases which were not resold in the same year. These purchase costs get deducted when you sell the item.
There are areas you might be able to play around with though. For example grading costs. You could probably deduct those expenses in the year incurred even though you might not resell the cards until 2-3 years down the road.
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