Andrea Fabiana Orellana failed to report $41,842 in income in 2004 and 2005 from sales of designer clothing, shoes and other items, according to a Tax Court summary opinion. Orellana is liable for $12,428 in unpaid taxes and $2,486 in penalties.
Orellana, who represented herself, sold items under several names, including “BlackTheRipper,” the court document said. She could not be reached for comment.
When the IRS asked for proof of costs and expenses Orellana testified that she never kept receipts saying “That would be ridiculous, unheard of. Unless there was some really bizarre reason why I kept a receipt, there were no receipts.”
It’s no wonder the U.S. Tax Court opinion said, “The petitioner’s attitude toward the preparation of her tax returns appeared to be cavalier.”
Orellana claimed her eBay sales were not a business, and characterized it as an online garage sale, according to the court document. She said she liked to shop for designer clothes and that this was a way to clean out her closets.
Orellana’s “garage sale defense” may have been valid had she kept meticulous records.
Proceeds from garage sales are taxable only if items sell for more than cost. In reality, most garage sale items are sold for a small fraction of original cost.
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