'ricarmic's' analysis (and 'cumos' and Mr. E's) are all correct. You have to regard value (sales) and losses in your business the way CRA (and the Income Tax Act) looks at them, and the way they expect you to report them.
Please put aside psychology and what your perception is of the "value" -- those aspects have nothing to do with your business records or your calculation of net profit. If an item sells well, at a higher price than you paid for it, you don't get off scot-free with all the excess -- remember, you pay tax on your good fortune or good judgment, as the case may be (less expenses), so there's no need to feel sheepish at all!
The fact is, a successful businessperson will buy or manufacturer items at the very best (i.e. lowest) cost he/she can manage, and sell them at the very best price he/she can get on the open market. This is exactly what you've done with your $1 item. The original value is meaningless except as an acquisition cost to you. The selling price is what your taxes and expenses are measured against. Cost of goods is a completely separate consideration in accounting.
So, if you sold that item for $100 and all had gone well, you would have had to declare that sale to CRA as income (on your 2014 return), less related expenses. Let's say, for the sake of simple discussion, you'd end up with a $70 net profit. CRA would have expected you to pay tax on that profit.
However, if your item was lost (and uninsured), you now have a loss of $100, not $1.00, because $100 was the price at which it sold, and the price upon which you will be taxed, less your expenses, regardless of the original value. In this example, your net profit would be $70, but your actual loss $100, making a net loss to you on this sale of $30. This is how business accounting works. It's completely fair and completely logical. Although my numbers are a bit different from 'ricarmic's', the principle is the same.
Look at it this way: if you were only allowed to deduct $1 as your loss, you'd be paying taxes to CRA on the whole $70 net profit on this sale, even though your customer never got his item and you had to pay him the $100, which would put you a total of $170.00 behind in this transaction -- hardly fair to you as the business owner, and certainly nonsense when seen in the light of proper accounting practices.
The bottom line: don't create worries for yourself about your costs of acquiring goods -- give yourself kudos for sourcing items at a great price and being astute enough to make a good profit!
As far as shipping insurance is concerned, I think most of us who have been selling for a while will say that real-world numbers don't justify paying for insurance and tracking in most cases. Even I admit that, but I consider the tracking and insurance I get with the higher services a bonus because I use them for other reasons (wanting to get an expensive item quickly to a customer, for example).
Read 'ricarmic's' eye-opener about that subject on this thread -- granted, he's in stamps, but if you're not in a high-risk category, the numbers will probably be similar: http://community.ebay.ca/t5/Seller-Central/My-experience-Updated-Self-Insurance-statistics/m-p/22247...
My suggestion to you would be to try limited international shipping for a while, to the "safer" countries, and see how much business you actually get from overseas customers, then decide whether to limit your shipping to the US and Canada.
