(MONEY Magazine) – Q. My three daughters-in-law all sell stuff on eBay. One of them actually made $10,000 last year. But none are paying taxes on the money they take in from online auctions. Is that legal?

A. The answer depends on whether your enterprising in-laws are selling the items for more or less than their original retail value. The IRS doesn't collect tax if you unload, say, an old guitar for less than you paid for it. But if you're selling your stuff at a profit (think Derek Jeter rookie card), you're supposed to declare that income. Aside from the honor code, however, the IRS has no way of tracking the cash that changes hands; eBay doesn't report to the tax man. Still, the agency is aware that this income usually isn't declared. So just in case of a future audit, it's a good idea to keep records of every transaction in which an item was sold at a loss. And if your daughters-in-law are using their eBay deals as a sideline business, encourage them to go ahead and declare their profits as self-employment income on a Schedule C. At least they'll be able to deduct expenses--including Internet access.