Re: Capital Gains on muscle car (state of PA)
 

Sam,

I'm having a tough time with all this. Unless this was a really high dollar value muscle car (nearing or into 6 figures), I doubt that the IRS would pay any attention, especially if there were no 1099's involved. Many, many vehicles these days sell in the $30K - $50K range so it hardly raises an eyebrow. Who's going to ask how long they've owned the car or how much they have invested in it?

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
Many, many vehicles these days sell in the $30K - $50K range so it hardly raises an eyebrow. Who's going to ask how long they've owned the car or how much they have invested in it?


[/ QUOTE ] Im pretty sure the IRS is very concerned about unreported 50K transactions,as well as the 100K ones .

Re: Capital Gains on muscle car (state of PA)
 

Bill,

First of all, I haven't seen you lately at the Pavillions. Just a reminder, but this is one of the reasons u moved from that tuff winter clime. Come on down! https://www.yenko.net/ubbthreads/imag...lins/laugh.gif

As to your comment, I hear you. But, I am asking for a friend as this is the direction she has been advised to head.


See u in Scottsdale... https://www.yenko.net/ubbthreads/imag...lins/beers.gif

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
Sam,

I'm having a tough time with all this. Unless this was a really high dollar value muscle car (nearing or into 6 figures), I doubt that the IRS would pay any attention, especially if there were no 1099's involved. Many, many vehicles these days sell in the $30K - $50K range so it hardly raises an eyebrow. Who's going to ask how long they've owned the car or how much they have invested in it?

[/ QUOTE ]

I'll quote myself from an earlier post: tax planning is encouraged, tax avoidance is unlawful. Just bec/ you don't think you'll get caught, doesn't make it right. I'm not sure if a situation like this constitutes fraud, but if so, keep in mind that there is no statute of limitations on fraud. So, that '7 year window' that everyone thinks they have - is not not 7 years! https://www.yenko.net/ubbthreads/imag...ns/naughty.gif

The best tax advice I gave to a fellow sYc member was to simply determine your price, calc the cap gain tax, and add that amount to your price. There are some netting down / grossing up calculations in there, but it's the best way to get your number & still pay your taxes.

BTW, 67rs, if there's more to this discussion than we've covered, by all means enlighten us.

Re: Capital Gains on muscle car (state of PA)
 

So, what happens if you lose money on a classic car? Can you write off the loss? https://www.yenko.net/ubbthreads/imag...mlins/hmmm.gif

Re: Capital Gains on muscle car (state of PA)
 

You can only claim the loss against other gains. If you end up with a loss for the year you are on your own . The IRS wants to be your partner only when you win.

Re: Capital Gains on muscle car (state of PA)
 

In general, as a private individual, only gains on capital property are assessed with respect to tax. Each piece of capital property is treated individually and gains/losses cannot be accumulated and taxed as a whole like a business or investment. This is why you cannot write off the losses on your daily driver...

Re: Capital Gains on muscle car (state of PA)
 

Chuck is mostly correct. You can deduct capital losses up to the amount of your capital gains plus $3,000 (if MFJ). You may be able to use capital losses that exceed this limit in future years, (called 'carryforward'), however carryforwards have a limited life - you can't carry them forward forever.

The IRS taxes income, not losses. In their mind, it's not their fault you had a loss, so why should they allow a tax deduction for it? The offsetting of cap gains + $3,000, and the carryforward is a concession. This is where tax planning comes into play. Let's say you are going to liquidate some construction assets, and are going to take a bath on them. That would be the time to sell the muscle car, that way you could offset the loss on the equipment against the muscle car gain.

I believe there is a s/t vs. l/t angle to this as well.

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
In their mind, it's not their fault you had a loss, so why should they allow a tax deduction for it?

[/ QUOTE ] Why is it when banks and mortgage companies make greedy and bad decisions they get bailed out on thier losses , but car owners dont?? https://www.yenko.net/ubbthreads/images/graemlins/no.gif Marlin, i think i am right on the point that in any given year ,any capital gain or loss can only be applied to that tax year and not carried over,unless it is a depreciation loss. That is the reason everyone wants to make any gains on Jan 1[so the tax on the gain wont have to be paid for 16 months] ,and get any losses in by DEC 31 to offset any gains that year..Im not a tax lawyer but i did stay at a Holiday Inn express last night.

Re: Capital Gains on muscle car (state of PA)
 

Leave that for another thread.

Re: Capital Gains on muscle car (state of PA)
 

Marlin, I researched this in 2005 and, in Ontario, there is a clear distinction between losses from capital assets and other "investments". Losses from CA's cannot be deducted against other gains up here. Is this not the case in the US? And if not, why can't one deduct the losses incurred on a daily driver since it is a capital asset also???

Re: Capital Gains on muscle car (state of PA)
 

"This is why you cannot write off the losses on your daily driver..."

Is there any concession for the individual who bot the car in 196X AS A DAILY DRIVER, and the car simply happened to be one of those cars that increased in value as opposed to the 99% that decrease in value?

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
Marlin, I researched this in 2005 and, in Ontario, there is a clear distinction between losses from capital assets and other "investments". Losses from CA's cannot be deducted against other gains up here. Is this not the case in the US? And if not, why can't one deduct the losses incurred on a daily driver since it is a capital asset also???

[/ QUOTE ]

Let's not mix Canadian Provincial Tax Law with the US IRC - the IRC is confusing enough! However, you make a valid point about mixing cap gains on assets vs. investments. I think I stated in my initial explanation that cap assets are tangible personal property (including your 'daily driver'). Commercial paper (ie; investments) are not really considered 'tangible', and are therefore treated differently in the U.S. and apparently in Canada as well.

Chuck,

I purposely used the word 'may' to indicate the possibility of a carryforward of cap losses. I can check into it more if you'd like, I have the IRC publication around here somewhere.....

Re: Capital Gains on muscle car (state of PA)
 

Guess I should be posting as XRoof Deuce now but will worry about that later. Really appreciate all the info this post is generating. What if part of the profit from the sale is reinvested in another muscle car? Can that be deducted from the gain amount? Linda

Re: Capital Gains on muscle car (state of PA)
 

Ill make one more post and then shut up. You can file to make a "like kind exchange" just like you do with real estate. You must set it up first ,then have 90 days to sell your car and purchase another. You will not pay any taxes on the gain if you flip it into another car of equal or greater value. There are many restrictions so do your home work. You can buy an item of more value and also less value and just pay on the difference in the case of buying a lesser value car. Once the 90 days is up, your done though. Its a great tool if you want to change cars the tricky part is selling your car and buying another in the 90 days,best to work it out with someone whos car you want before you start the clock ticking.

Re: Capital Gains on muscle car (state of PA)
 

I knew I should have stayed in that Holiday in Express!!! https://www.yenko.net/ubbthreads/images/graemlins/no.gif

https://www.yenko.net/ubbthreads/imag...mlins/haha.gif

https://www.yenko.net/ubbthreads/imag...lins/beers.gif

Great thread guys, Believe it or not this is very interesting stuff!

Re: Capital Gains on muscle car (state of PA)
 

Be VERY careful with 'Like Kind Exchanges', as non real estate items may only apply to business'. I can check it out if someone really needs to know. I'm sure someone does, so I'll look it up over the weekend.

Let me clarify an earlier post about 'investments'. Investments are actually considered capital assests when held for personal use - stocks, bonds, etc... It's when commercial paper is held for sale to customers, that's not considered cap assests - but more likely 'normal' assets because it's a business.

Re: Capital Gains on muscle car (state of PA)
 

what if you have a trust that owns only the car then the buyer has a trust funded with the money to buy the car then you swap the trustee's of them? Technically there is nothing made either way just the control of the trusts?

Re: Capital Gains on muscle car (state of PA)
 

The farmers newspaper that I subscribe for the estate auction listings had an article not long ago about the feds tightening the regulations on like kind 1031 exchanges. Seem as they had been lax and were allowing most any type of exchange to qualify. Now they're going to hold the exchanged propertys to really be like kind, example, no trading farm land for apartment buildings, as they had allowed in the past.

1031 exchange rules

Read em before you need em. https://www.yenko.net/ubbthreads/imag...mlins/hmmm.gif

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
Be VERY careful with 'Like Kind Exchanges', as non real estate items may only apply to business'.

[/ QUOTE ]

I have been told this never been tested in court with cars being used as a Like Kind.....I wouldn't want to be the test case. Let Uncle Sam have his share. Less ulcers that way.

Re: Capital Gains on muscle car (state of PA)
 

Here's the IRS Publication 550 snipet regarding Capital Loss Carry-Forwards:

<font color="red">Capital loss carryover.

If you have a total net loss on line 16 of Schedule D that is more than the yearly limit on capital loss deductions, you can carry over the unused part to the next year and treat it as if you had incurred it in that next year. If part of the loss is still unused, you can carry it over to later years until it is completely used up. </font>

It appears the IRS removed the time limitation on Loss Carry-Forwards! So, hang onto them.

Re: Capital Gains on muscle car (state of PA)
 

Yeah, but are we gonna get an overtime bill from you!! https://www.yenko.net/ubbthreads/imag...emlins/eek.gif

Seriously Marlin - this is awesome gouge that you are providing. It is apparent that this is more than just a concern from my friend. Thanks for your valuable counsel. We APPRECIATE it! https://www.yenko.net/ubbthreads/imag...lins/beers.gif

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
Let Uncle Sam have his share. Less ulcers that way.



[/ QUOTE ] Thats is certainly the best advice. If there are two ways something can be interpreted , assume the worst option and you will be fine.

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
[ QUOTE ]
Let Uncle Sam have his share. Less ulcers that way.



[/ QUOTE ] Thats is certainly the best advice. If there are two ways something can be interpreted , assume the worst option and you will be fine.

[/ QUOTE ]

Unfortunately, both quips of advice are true. The IRS is in the business of making money, plain and simple, the politicians are trying to make exceptions for their constituancies (votes!) - hence the reason for our tax code instead of a flat tax!

Re: Capital Gains on muscle car (state of PA)
 

One of the biggest surprises I learned when I bought my company 4 years ago, was how much effort goes into tax minimization. It seems like every year, I spend the first 11 months trying to maximize profit, and then spend December trying to minimize the first 11 months efforts.

Re: Capital Gains on muscle car (state of PA)
 

For the Canadians on the site from the CCRA website...

Personal-use property losses When you dispose of personal-use property that has an ACB or proceeds of disposition of more than $1,000, you may have a capital gain or loss. Any capital gain must be reported. Read more about calculating the gain or loss in Personal-use property.

However, if you have a capital loss, you usually cannot deduct that loss when you calculate your income for the year. In addition, you cannot use the loss to decrease capital gains on other personal-use property. This is because if a property depreciates through personal use, the resulting loss on its disposition is a personal expense.

These loss restrictions do not apply:

if you disposed of personal-use property that is listed personal property ; or
to a bad debt owed to you from the sale of a personal-use property to a person with whom you deal at arm's length.
For information on gains and losses from listed personal property such as paintings, rare books, coins and stamps, see Listed personal property (LPP).

Re: Capital Gains on muscle car (state of PA)
 

Render unto Ceasar...

Re: Capital Gains on muscle car (state of PA)
 

[ QUOTE ]
One of the biggest surprises I learned when I bought my company 4 years ago, was how much effort goes into tax minimization. It seems like every year, I spend the first 11 months trying to maximize profit, and then spend December trying to minimize the first 11 months efforts.

[/ QUOTE ]

Ah grasshopper! Enter the concept of 'tax planning' https://www.yenko.net/ubbthreads/imag...mlins/grin.gif Instead of spending one month on tax minimization - it's a 12 month project! https://www.yenko.net/ubbthreads/imag...mlins/wink.gif That's why the tax guys get paid the big bucks, and get paid all year long - hmmm.... why didn't I specialize in taxes again.... silly me https://www.yenko.net/ubbthreads/imag...s/rolleyes.gif

Re: Capital Gains on muscle car (state of PA)
 

thats why i have a financial tax planner.

not just a tax guy?

Re: Capital Gains on muscle car (state of PA)
 

at least the cost of living here is cheaper than some parts of the country like NY or california.

Re: Capital Gains on muscle car (state of PA)
 

The Wall St. Journal had an article on the IRS and collectibles (including old cars) in their 2/14/2008 issue talking about this subject. The article was titled "If You Collect, the IRS Will Collect From You". I still have the article but it's pretty lengthy. Couple of points....

* when you sell them, you will pay a special 28% capital gains tax, nearly double the current 15% rate for long term capital gains on other investments. They said don't hold your breath waiting for this to change even though there is a bill in the senate to change this. They said most don't expect it to pass.

* IRS defines "collector" as one who buys and owns items primarily for personal pleasure. An "investor" is one who buys chiefly to make a profit. A "dealer" is in the business of buying and selling. Those are the three classifications. To prove you are an investor you have to show detail of tracking ups and downs in the value of your objects over time. Goes on to say as an investor you should be getting appraisals on a regular basis and subscribe to journals that keep a pulse on the market. If you don't keep businesslike records you will look more like a collector to the IRS. Collectors can't take a deduction for keeping up a collection because expenses are considered personal under Section 262 of the code. Investors, however, may deduct certain costs.