Can you explain your question more fully? I am not sure I understand what you mean by paying taxes without selling something. If you have no income, you have nothing to pay taxes on. You pay taxes on income received for work you do or on the profits of a business, investments, rental property, etc. If you have a hobby which generates occasional income, such as an artist or writer, you would pay taxes on the income less your expenses needed to generate that income. For instance, if you are an artist and sell a painting for $500, you would pay taxes on the $500 less the cost of the canvas and paints used to create the painting.

We can expect the IRS and local governments to want their money. Of course there will be a few small exceptions. Like yard sales and other small sales. But of course it is always safe to contact your accountant. any time I have a question that relates to taxes I always ask the accountant/CPA. Keeps you out of trouble :)

Makes sense, gain on sale of asset would consitiute an income and therefore be tabale. Hoe does this work with depreceation? If an asset has say a book value of $100 and is the depreciated over tome to a value of $60 and is later sold for $80 is this considered a $20 gain on sale of the asset and therefore incurrs taxes?

I think this is the answer you are looking for. The IRS requires you to pay tax on personal property that is sold if there is a gain. Check with your state and municipality about sales taxes.

You should be able to find part of the information you need on your state tax commission's web site. In my state, a person can hold three garage sales per year without having to pay sales tax on the proceeds. As for federal taxes, the IRS likes their money, and they will expect you to report your earnings if they amount to very much. Message Edited by BizResearcher on 10-26-2009 08:40 PM

If an assest were to be sold and the sales price exceeds the depreciated value (net book value) then the excess would be considered a gain and subject to depreciation recapture. In other words, because the IRS allows a taxpayer to deduct the depreciation of an asset from the taxpayers ordinary income, the taxpayer has to report any gain from the disposal of the asset (up to the recomputed basis) as ordinary income, not as a capital gain.