Reporting consignment sale of jewelry

Forum|Forum|3 months ago
March 31, 2026
1 reply
12 views

A client sold a diamond ring on consignment at a local jeweler. The jeweler paid her the agreed to consignment amount. The jeweler sent her a 1099-NEC for her portion of the proceeds of the sale. The client did not make a profit on the transaction. How is this reported on her tax return?

Do I report the transaction as other income subject to self-employment tax and subtract the original value of the ring up to the sales price of ring?

Lacerte Tax

Best answer by BobKamman

We have a tax on income, not pieces of paper. I don't think $1.258 is enough to trigger a CP-2000 these days, but so what if it does? Filing a Schedule C and SE might trigger an audit too. I would put a $1,258 sale and cost basis on Form 8949 / Schedule D and attach a one-paragraph explanation, suitable for sending again to IRS if a notice is generated.

BobKamman

Level 15

The jeweler is obviously a diamond in the rough.

Generally, a consignment store is not required to issue a 1099-NEC or 1099-MISC to individual consignors for the sale of their goods.

The Merchandise Exemption: IRS guidelines specifically state that payments for merchandise, inventory, and freight are exempt from 1099 reporting. Since you are remitting the proceeds of a physical item sold (minus your commission), this is considered a payment for goods, not compensation for a service.

https://help.consignorconnect.com/knowledge/annual-1099-reporting

Your client is obviously not in the trade or business of selling personal possessions, so it does not belong on Schedule C.

You now have to decide how to pound square pegs into round holes.

I would put it on Form 8949 and Schedule D, not claiming a loss if that is the result. (Does the client know the cost basis, or was this a gift from the aunt who inherited it in 1950?)

You can try playing "trick the IRS computer" by adding it in and then subtracting it out somewhere it doesn't belong, but I'd rather be honest and warn the client an IRS notice might ask for details in 12-18 months. How much is involved here -- $200, or $2,000?

D

DodgerfanAuthor

Level 3

Bob:

Thank you for your response. It was inherited in 1992 and was worth approximately $2,000 then and sold for $2,000 in 2025. My client's share was $1,258. I could put the transaction on Schedule D and show a cost basis of $1,258 and proceeds of $1,258. What do I do about the 1099-NEC which was issued for $1,258? I think I need to report it somehow.

BobKammanAnswer

Level 15

We have a tax on income, not pieces of paper. I don't think $1.258 is enough to trigger a CP-2000 these days, but so what if it does? Filing a Schedule C and SE might trigger an audit too. I would put a $1,258 sale and cost basis on Form 8949 / Schedule D and attach a one-paragraph explanation, suitable for sending again to IRS if a notice is generated.

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