I finally understand why I follow an urge to clean out my closets/attic/cabinets after I file my taxes. This desire is not a nesting urge, nor is it spring cleaning (although I like that term). After I finalize my examination of every little box on the IRS forms, I can't stop my obsession with closed-in squares. My closets, drawers, etc. begin to resemble those little boxes on the tax forms, and my apartment suddenly becomes a government mandate with a deadline. Invariably, as I begin my "spring cleaning," I discover a forgotten deduction that would have dropped me into a lower tax bracket. This habit is a masochistic tax-return hangover, and the headache is killing me.

At this point, I'm ready to turn my life, my taxes, and my closets around so they can read my lips. I'm not going to be dictated by their sneaky little behaviors anymore. Fortunately, I found some old stock market magazines in one closet and a few of them - although a little faded and curled around the edges - contained a few words of eternal wisdom: Organize, Sell, Invest, and Capital Gains. At the risk of repeating these words (which I must do so I can recycle these magazines), I'll walk you through these steps:

1. Organize - this activity would normally take me a year to accomplish. However, since I plan to move within the next six months, I have a goal in mind. I won't keep what I can't carry down three flights of stairs (you try living in a walk-up at my age?). Everything else will be tossed out the window into the trash bin below if unsalvageable, and I'll call the Salvation Army to pick up the rest. However, if I find items that are in good shape and I still don't want them, I will?
   
   
2. Sell - Fortunately, online markets eliminate a need to find a place to situate a yard-sale. Old textbooks, furniture, and pheasant feathers (don't ask) all have markets somewhere on the Internet. Unlike a yard sale, online sales require costs of shipping and handling, plus time to take the item to a shipper. However, successful yard sales also take time and money to organize and conduct. Additionally, yard sales usually don't bring the wide, diverse audience that online venues offer, especially for off-the-wall items.
   
   
3. Invest - At this point, it doesn't matter if I made a profit or loss from my sales. I still have money in my hands, and I'm going to invest it in my portfolio. This action will eliminate any urge to buy something that I'll have to pack in a box, fit in a closet, or carry with me. I can take my portfolio with me wherever I go without lugging it down three flights of stairs, and possible profits might offset any losses incurred during my sales. However, I do need to keep track of my transactions, including all costs, profits, losses, and investments. I'll need this information to figure my taxable income in 2006.
   
   
4. Capital Gains - Yard sales and online sales may be different, but they have one similarity - they represent opportunities for profits and losses. On a small-time scale, these figures might not amount to much. However, the IRS wants us to report all worldwide income (see "Offshore Investments, Tax Fraud, and a Civilized Society"), so receipts are a great way to prove both income and costs. Instead of filing these receipts in a coat pocket, I now use several envelopes and a money management software program. Next year, I won't have to take over the living room floor with my tax papers, because everything will be ready for me to drop the right numbers into the correct slots. But, there are other factors to consider when selling or giving away used merchandise?

For instance, if we plan to donate items, we might ask the receiver - especially a professional organization like the Salvation Army - to help us total the amount of our donations. They would know from first-hand experience how much our used items are worth. Otherwise we need to poke around the local thrift store to understand our donation's total value. Why? Because we need to figure the fair market value of an item before we can claim any charitable contribution.

According to the IRS, the fair market value of most household or personal items is generally much less than the price paid when new. We can claim only what the item would sell for at a garage sale, a flea market, or a second hand or thrift store. Alternately, this value also sticks to items that we plan to sell. If I purchase a book for $75, that book may now be worth only $35.

"Whoa, whoa, whoa" you might stutter. "What if I paid an exorbitant amount for this lamp shaped like the Titanic? Don't I get to profit from my investment?" Granted, it might be difficult to find another Titanic lamp to compare the difference between the price you have in mind and what the market might bear for this item. Since sentiment (and cost) often dictates our senses, we might pay for an unbiased appraisal. That way we could learn whether that lamp is a true collectible or if it needs to be tossed out my window.

If we want to create an impact on our portfolios and on our taxes, we need to organize, sell wisely, invest our cash returns, and determine our capital gains. On that note, next week I'll share why ten-year-old used bath towels are not "collectibles," even if they're inherited from a beloved grandfather. Alternately, I'll demonstrate how a collectible item acts like a stock market investment, but only if we understand its value and especially if remember where we hid it.

Until Next Week,
Linda Goin