I have sold a variety of items online this year. I would not really say I have a real business more like a yard sale where I do sometimes buy things to resell (but it's rare). It's usually things I have lying around the house, gifts, etc. I have filed a schedule C in the past for things like this, but I did it under the incorrect assumption that if I had received the item as a gift or it was purchased for me that the initial cost would be $0 and the amount I sold it for would only be profit. I now know that the initial cost basis should be the fair market value of the item on the date it was received.

My question is how do I estimate this initial market value? I have the receipts for some of them so that's easy. However, I don't know what to do with other items I purchased a while ago (and don't have a receipt), things I received free or as a gift, and things that were parts of other things I own (for example: selling a car part that was part of my car and that I had not purchased separately). If I do some research and come up with a reasonable justification is that enough or is there a specific process for doing this? I know there is a way to do this if I wanted to figure out the current market value if I was donating an item, but I'm trying to figure out what the market value was when I received the item. If I don't have any proof, am I just forced to assume a $0 cost basis?

I think it's still going to come out to either $0 profit or even a loss (which I cannot actually claim), but it's my understanding I should still file a Schedule C anyway.

“ I now know that the initial cost basis should be the fair market value of the item on the date it was received.”-->In general, correct. When you receive a gift,for example, your cost basis is the same as the donor's cost basis except when it's not! It all depends on whether the donor's cost basis (I guess it iscalled carryoverbasis) was more or less than the FMV on the date of the gift. The donor is the person who gave the gift to you. You are the donee,or recipient, the person who received the gift. If the carryover basis is less than the FMV at the time of the gift, the answer is easy. Your cost basis is always the carryover basis. If the carryover basis is greater than the FMV at the time of the gift, it gets a lot more complicated. You will actually not know your basis until you sell the stock because it will have a different basis if it is sold at a gain than if it is sold at a loss. If the gift you received is then sold at a loss, your cost basis is the lower of either the carryover basis or the fair market value at the time of the gift. Tis refers tolower of cost or market rule.If the gift you received is then sold at a gain, your cost basis is the carryover basis from your donor.
Please visit the IRS website here; Publication 551 (5/2002), Basis of Assets
“ I know there is a way to do this if I wanted to figure out the current market value if I was donating an item, but I'm trying to figure out what the market value was when I received the item. If I don't have any proof, am I just forced to assume a $0 cost basis?”-->I guess so;in general when someone says that a item is vintage it means that it is at least twenty years or older. In cars, however, vintage is considered ten years or older. When a item is over 100 years old it is considered an antique.