USA Sold a large sum of stuff for a friend on eBay. Now need some guidance on paying him.

[jforrest1980]

OK, here's the deal. This is my first post, so I am sorry if this is in the wrong place.

I received a large video game collection from a friend, and we agreed that I pay him 15.5K for it after I sell it on eBay for him. I keep the profit after that. Now we are about to the point where I need to pay him, and are having some issues understanding one another. I have known this guy for 20 years by the way, He is making some odd requests, but really because in general he's kind of an weird guy. For one he doesn't have a checking account, but he does have a savings. I think his requests are more to him being uneducated in how checks and banks in general work, opposed to him trying to evade taxes. He's one of those guys that only carries cash, and never makes purchases any other way.

I figured I would just write him a check for 15.5 thousand and be done with it. He told me he wanted multiple small checks, or money orders. I told him no, that's a crazy idea, and asked him why. He said he's scared he will spend the money if it sits in the bank. So then I suggested that he needs to grow up a bit, and learn to manage money. Then he suggested that I write the car dealership a check for 15.5k as a partial payment.

At this point I told him I would research a bit and get back to him, so now I'm here. I'm not sure if writing a large check for a car for a friend is a good idea when tax time comes around, I think it would look weird for not just myself, but for him as well. I actually don't know if that's money laundering. That's why I'm here, I want to make sure we both have a safe transaction, even if it means one, or both of us lose money in taxes.

Some information about me:

A. Myself and the client have a written agreement stating that I sell his games, and pay him 15.5k. This was written by my girlfriend, who is an employment attorney.
B. I filed for an LLC last week, because my eBay sales will be around 17-20k for the year, or more after all this is done.
C. I'm in Ohio

So here is what I need to know:

1. If I write HIM a personal check for 15.5k can this be written off as a business expense? Since I am offering a service with my business selling items for people on eBay for them, could it be written off as a purchase to run my business?

2. If I write him a personal check, since we have an agreement, would he, myself, or both of us incur any tax fees?

3. Could I write him a check for his car? Would this be illegal, and what kind of fees could we both expect to incur?

Basically to sum up, I just want some guidance on the safest, legal way to get him this money.

Thanks in advance,

 

[Steve-LevelUp]

I will start with this, I am not a tax expert. Here are my thoughts though.

You are buying $15.5k worth of inventory to sell for $17k+. The inventory would be recorded as a Cost of Goods Sold and therefore would be a deductible expense.

The net profit on this transaction would be taxable for you.

The payment to your friend for $15.5k is a little trickier. I would not recommend writing a check directly to a dealership, however, you could perhaps work with him and a bank so that you write him a check, they cash it in his name and then give him a draft, from him, to the dealership. This ensures your records show you paying him the $15.5k. he can deal with his own records.

I hope this helps.

Steve