Scrapping and Taxes

Originally Posted by t00nces2

I am no tax expert, but I have no financial gain. The yard weighs what I bring in and pays me exactly what it is worth... We are even. No gain either way. Now, if my labor added value and they paid me for more than exactly what it was worth, then I would have to pay taxes on the difference between what I got paid and exactly what it was worth. Or, if someone were to pay me with scrap metal for work I performed for them, I would have to pay taxes on scrap metal I was paid with.

I dont think that works like that unless you are scrapping things you paid money on, and are scrapping for less than that. You dont pay taxes based on the difference of price between what an item is worth and what you sell it for.



For example, if you buy a stove for $300, use it for 5 years, then scrap it for $5, you do not owe taxes because technically you didnt make any money off that, you actually LOST $295.

However, if someone gives you a stove for free, and you sell it for $5, you owe taxes on the $5. In business, revenue - expenses = profit, and you are taxed on profit. So in example one, the revenue is $5, expense is $295, so profit is -295. The other example its $5-$0 for $5 profit, which you owe taxes on.....

This is also how taxes on stock work (although its a different tax than income tax). If you buy a stock for $10, and sell for $20, you owe tax on the $10 of profit. If you buy a stock for $10, and sell for $5 you have a loss and dont owe taxes. Same with metal/scrapping I would assume, taxed on the profit.