I'm not a tax accountant (but I've dealt with this hobby rule before). That said, here's my take on your hypothetical:
You "made" $500 on the jersey. In order for you to get that to sell, you had to travel to Georgia, pay for a hotel, eat while there, etc. Your expenses outweigh your profits...no taxes due, but also can't claim a deduction for any travel expenses which are in excess of the profits of the sale ($500), unless you want to prove you are trying to make a living in the collectibles business (see guidelines above). Your costs for a bike, races, etc. don't have anything to do with it.
I highly doubt the IRS would touch you on this example. In NY, there is a "garage sale" rule. Can sell up to like $600/year without having to claim it/prove original cost/etc. But if you go around and buy up "junk" and have a garage sale 40 weekends a year (or have 5,000 ebay sales), and you make a profit, that is taxable.
If you lived next to Lance and had him sign 50 jerseys to help you pay for college, and you sold them each for $500...then you're supposed to pay taxes on those profits.
A similar hypotheical: You go to a baseball game. Catch someone's record-breaking homerun ball. Sell it at auction for $1,000,000. That is taxable income. You can offset it with costs (the ticket for the game, auction fees, security), but the net profit is taxable. And you can't offset the profit with say the cost of your baseball card collection. Although I read about a guy who bought up huge blocks of tickets for certain games in order to try and catch a record-braking Barry Bonds' ball. If he had been successful and sold the ball, I would think he could claim all those tickets as an expense.
You "made" $500 on the jersey. In order for you to get that to sell, you had to travel to Georgia, pay for a hotel, eat while there, etc. Your expenses outweigh your profits...no taxes due, but also can't claim a deduction for any travel expenses which are in excess of the profits of the sale ($500), unless you want to prove you are trying to make a living in the collectibles business (see guidelines above). Your costs for a bike, races, etc. don't have anything to do with it.
I highly doubt the IRS would touch you on this example. In NY, there is a "garage sale" rule. Can sell up to like $600/year without having to claim it/prove original cost/etc. But if you go around and buy up "junk" and have a garage sale 40 weekends a year (or have 5,000 ebay sales), and you make a profit, that is taxable.
If you lived next to Lance and had him sign 50 jerseys to help you pay for college, and you sold them each for $500...then you're supposed to pay taxes on those profits.
A similar hypotheical: You go to a baseball game. Catch someone's record-breaking homerun ball. Sell it at auction for $1,000,000. That is taxable income. You can offset it with costs (the ticket for the game, auction fees, security), but the net profit is taxable. And you can't offset the profit with say the cost of your baseball card collection. Although I read about a guy who bought up huge blocks of tickets for certain games in order to try and catch a record-braking Barry Bonds' ball. If he had been successful and sold the ball, I would think he could claim all those tickets as an expense.