Finance Q&A

Categorizing income from sale of personal property or Budget?

Q. I'm wondering how others here categorize the money they receive when they sell an item of personal property. In the past I had an income category set up just for such occasions. There's basically no tax implications at the levels I'm talking about so there's no real reason to track it as income. It occurs to me that sometimes it might be beneficial to apply the income back to an expense category that relates to the item I've sold. That way I can get a better indication of my actual expenses when I'm preparing my budget.

A. In a perfect(?) world (at least from an accounting standpoint), you would already have been using Quicken back when you bought this property and would have added its cost to an Asset account called Property(?). Now, when you sell it, you would put the cash into your Cash or Bank account, reduce that Asset account by the cost previously recorded (not the proceeds!), and put the difference into Gain or Loss on Sale of Personal Property. In the less-than-perfect world we actually live in, you probably should just put the proceeds into an income category with a name like Sales of Personal Property, and designate this as a non-taxable category. If you had put the cost of the property into an Asset account, reduce that account by the amount previously recorded and transfer that amount as a reduction to Sales of Personal Property. If this was property of such minimal value that you just recorded as an expense when you bought it, then just reduce that expense by the sales proceeds, as you suggested. In the rare case when you get more than you paid for the property, Uncle Sam will expect you to report the gain on your tax return. This is one of those asymettric parts of the tax rules: profits are taxable, but losses come under the heading of "personal, living and family expenses" and are not deductible.

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