Potential Tax Liability

... In my view, there is nothing that should be done in this situation unless and until the taxpayer receives a letter of inquiry or Notice of Audit....   If a taxpayer or representative  were to contact the I.R.S. about a filed return first, say to explain a Form 1099, their chances of being audited would only go up, thereby asking for "trouble".

Steve (Warmglowingtubesart), thanks very much for your informative posts.  But note in the OP the indication that the items were sold "within this year."  So presumably what is being looked for is guidance about how the sale proceeds should be treated when the 2016 return is prepared a few months from now.  (And perhaps also if a final quarterly estimated tax payment for 2016 will be submitted).

Regards,
-- Al
 

Yes, of course he should timely file the return, and inform his preparer regarding this situation. Either he or his representative will  need to find out  what the fair market value of the electronics/audio equipment claimed on the Estate return  (due 6 months after the date of death ) was. That number will be his basis for purposes of  determining whether there was a capital gain, loss or "wash" from sales of the electronics (most probably a loss or a wash).



"It is much easier to be critical than to be correct."
                                                --Benjamin Disraeli

                                                                                         
                                                                                                            'Bye all
                                                                                                         ---Steve

Jea48 posted:
"If I remember correctly EBay... was forced by the IRS to send out a 1099-K to sellers..."
I suppose you could say that if the IRS informed eBay they should start following the law like they should, that you could say they were forced.
That's also why policemen have guns (in the USA). Governments come in two types: those who assert the right to use superior force, and governments whose members are in jail, in exile, or in graves!
I received a 1099 from Paypal one year a few years ago. I made sure I deducted Paypal fees (banking fees), shipping costs (postage and packing), original costs, etc. etc. I was just following the law ; ) !!
There is also a simplified calculating method for such issues; I think you can deduct 1/3 of "hobby" sales.
IANAL, but my opinion is this is an inheritance issue.
(I gotta go take my meds now).

Here is your $5 answer... I'll echo warmglowtubeart.

See Internal Revenue Code § 102 Gifts and Inheritances: 

General Rule – Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance. 
....
See also Income Tax Regulation 1.102-1 Gifts and Inheritances.