Capital Gains on muscle car (state of PA)
 

Trying to help a friend out. Friend bought a nice muscle car brand new in 1970 and sold it in 2007 for a sizeable appreciation. Initially my friend was told by her accountant that a Capital Gains of 15% was owed, but more recently friend was told 28% because "the car is an antique". Does this make sense? https://www.yenko.net/ubbthreads/imag...lins/dunno.gif

Appreciate any guidance. Thanks! https://www.yenko.net/ubbthreads/imag...lins/beers.gif

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

Did she take into consideration all the expense of storing and maintaining the vehicle for all these years?...i know the minimum for any body shop has to be 25 bucks a day for outside storage...

I believe if you did the calculation, she may have been able to do better by just putting the money in a CD..??? (depending on the car she bought)

I would think you can write off the expenses...but I'm no accountant??? Just my guess...

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

The question is about the tax rate, 15% vs. 28% on a long term capital asset, not really on how to calculate the gain itself. BTW, if you claim 'storage' fees as an expense, be sure you can back it up with receipts.

I have not looked at a schedule D in a while, I'll check it out - but it sounds 'unique' to me. However, never underestimate the IRS!

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

It should be 15% capital gains if you have owned the car longer than a year. It is 25% if you own less than a year.
Unless some new tax law has changed this,that is what it has been. Maybe Marlin can chime in as he is a numbers cruncher.

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

The short vs. long term break is indeed 1 year, keep in mind that if you keep the car exactly 1 year that is still considered 'short' - so sell the day after you've owned it a year! https://www.yenko.net/ubbthreads/imag...mlins/wink.gif

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

[ QUOTE ]
Trying to help a friend out. Friend bought a nice muscle car brand new in 1970 and sold it in 2007 for a sizeable appreciation. Initially my friend was told by her accountant that a Capital Gains of 15% was owed, but more recently friend was told 28% because "the car is an antique". Does this make sense? https://www.yenko.net/ubbthreads/imag...lins/dunno.gif

Appreciate any guidance. Thanks! https://www.yenko.net/ubbthreads/imag...lins/beers.gif

[/ QUOTE ]

great topic! looking foward to the info thats unearthed! https://www.yenko.net/ubbthreads/imag...ns/scholar.gif

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

Thanks for info so far guys. Any ideas what the relevance in referring to the car as "antique" by the accountant?

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

I believe muscle car investments took the place of real estate
investments. If you purchase & keep a house more than two
years, you don't have to pay capital gains tax on it.
Automobiles should be exactly the same situation. Leave it
to the bleep-ing government to find a way to take more
money out of our pockets. https://www.yenko.net/ubbthreads/imag...ns/Charley.gif https://www.yenko.net/ubbthreads/imag...thumbsdown.gif

Now this is going to move into a politically toned topic soon. https://www.yenko.net/ubbthreads/imag...mlins/grin.gif
Nuch

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

No idea. I have claimed every penny I have ever made,as painful as that was,and my Cpa has always filed it between 15-25% depending on how long i owned the car so like I said unless they have changed something,that is how i have paid in the past.

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

[ QUOTE ]
I believe muscle car investments took the place of real estate
investments. If you purchase & keep a house more than two
years, you don't have to pay capital gains tax on it.
Automobiles should be exactly the same situation. Leave it
to the bleep-ing government to find a way to take more
money out of our pockets. https://www.yenko.net/ubbthreads/imag...ns/Charley.gif https://www.yenko.net/ubbthreads/imag...thumbsdown.gif

Now this is going to move into a politically toned topic soon. https://www.yenko.net/ubbthreads/imag...mlins/grin.gif
Nuch

[/ QUOTE ]

Please disregard the tax information contained in the post quoted from above.

Tax info can be difficult enough without including real estate tax considerations into the equation. Let's stick to cars as capital assets, and what the applicable rate would be.

Back on topic, the 28% statement in the first post rings of Partnership Interest accounting which has a 28% rate gain for 'collectibles'. I'll look it up this afternoon, but I believe the 15% rate is the one to use.

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

[ QUOTE ]
.....I have claimed every penny I have ever made,as painful as that was..........

[/ QUOTE ] https://www.yenko.net/ubbthreads/imag...mlins/hmmm.gif

Normally I would say it is time for a new accountant after reading a statement like that, but since the IRS is watching us and reading all our posts I'll say "me too, and thanks for being a good taxpayer" https://www.yenko.net/ubbthreads/imag...iggthumpup.gif https://www.yenko.net/ubbthreads/imag...mlins/flag.gif

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

There is a great article on this topic in the October 2007 issue of Sports Car Market. Here is a link but you must be a SCM Platinum Subscriber to access it.

http://www.sportscarmarket.com/Legal...2007/October//

Perhaps someone has the magazing sitting around and can elaborate on what was said in the article.

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

Or maybe someone could scan it?! https://www.yenko.net/ubbthreads/imag...lins/laugh.gif

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

[ QUOTE ]
Trying to help a friend out. Friend bought a nice muscle car brand new in 1970 and sold it in 2007 for a sizeable appreciation. Initially my friend was told by her accountant that a Capital Gains of 15% was owed, but more recently friend was told 28% because "the car is an antique". Does this make sense? https://www.yenko.net/ubbthreads/imag...lins/dunno.gif

Appreciate any guidance. Thanks! https://www.yenko.net/ubbthreads/imag...lins/beers.gif

[/ QUOTE ]

Did a little research, nothing is ever 'clear' with the IRS!

There are 3 'maximum' tax rates, pertaining to different situations. The 3 maximum tax rates are 20%, 25% & 28% - we'll focus on the 28% maximum since it includes a situation for 'collectibles'. Per the IRC:

"Twentyeight percent rate gain includes capital gains and losses from the sale or exchange of collectibles (as defined in section 408(m) without regard to section 408(m)(3)) held for more than one year and certain other types of gain."

So, what is a 'collectible'? Strange as it sounds, the term 'collectible' is defined in the IRC pertaining to Pension Plan Acquisitions! (The logic is such that a pension plan should treat the purchase of a 'collectible' as a distribution from the plan assets... stop snoozing!). Section 408(m) defines 'collectible':

" <font color="red"> (2) Collectible defined

For purposes of this subsection, the term "collectible" means -

(A) any work of art,

(B) any rug or antique,

(C) any metal or gem,

(D) any stamp or coin,

(E) any alcoholic beverage, or

(F) any other tangible personal property specified by the

Secretary for purposes of this subsection.
</font>

What took me on a wild ride was the last statement regarding 'other tangible personal property' - it's a pretty wide net for the IRS to throw out there. So, I ended up in Section 408(m) where our gov. basically is giving themselves an open window to include additional items in the future (read: if there's a run on beanie babies, and the gov wants more $, define it as a collectible, and the tax rate jumps to 28%).

I would conclude that an automobile is not defined in the IRC as a 'collectible' - 'at this point in time', but it's subject to change by certain democratic schoneyeists. https://www.yenko.net/ubbthreads/imag...mlins/grin.gif Therefore, the sale of an automobile is considered a capital asset, per the IRS instructions for Schedule D: Capital Gains and Losses:

"Capital Asset:

Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car stocks and bonds are capital assets." Yada, yada yada.....

So, whoever gave your friend that snipet about 'collectibles' is pretty sharp! Kudo's or TastyKakes to them! https://www.yenko.net/ubbthreads/imag...lins/smile.gif It's always good to know your tax position before you file - and not be doing tax research after the audit notice comes in the mail.

BTW, it sounds like Chad has a good CPA, you don't cheat the government, something about 'death &amp; taxes' being interelated on several levels. https://www.yenko.net/ubbthreads/imag...ns/naughty.gif Remember, tax planning is encouraged, tax avoidance is unlawful. https://www.yenko.net/ubbthreads/imag...ns/scholar.gif

PS: Forgot to add, you can't avoid the 28% tax on collectibles by going into a partnership - they still getcha when you sell the partnership interest - just in case any of you enterprising folks were considering this option to protect your 'collectible' wine collection!

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

If you dont vote Republican,it wont matter what is considered long term,short term, or collectible . Capital gains rates will equal regular income. I know a few guys on this site that think a long term investment means they owned it for over 10 days https://www.yenko.net/ubbthreads/imag...mlins/grin.gif https://www.yenko.net/ubbthreads/imag...mlins/grin.gif https://www.yenko.net/ubbthreads/imag...mlins/grin.gif

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

I likey likey that word "Schoneyeists" https://www.yenko.net/ubbthreads/imag...mlins/haha.gif https://www.yenko.net/ubbthreads/imag...mlins/haha.gif https://www.yenko.net/ubbthreads/imag...lins/beers.gif

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

Marlin,

This is what I heard you say (similar to what Charlie Brown hears when his parents talk)....wah, wah, wah-wah, wah, wah, wah, wah-wah.......

Now - pls don't take offense as I have been accused with having the attention span of a ADHD gnat https://www.yenko.net/ubbthreads/imag...ins/tongue.gif !

But, could you put that in little-people's terms https://www.yenko.net/ubbthreads/imag...lins/laugh.gif ?

So in your opinion, the car is NOT a collectible. Right? So the car IS a capital asset, which means a capital gains tax is applied to captital assets? So, what tax rate would that be?

What did you mean by your statement: "So, whoever gave your friend that snipet about 'collectibles' is pretty sharp! " I did not mention anything about collectibles or were you referring to someone elses comment.

Also, my friend's accountant used the term "antique" in order to somehow place it into the higher captial gains category. I thot there were strict guidelines as to what an antique automobile was (vs. i.e. a classic). She never bought the car in 1970 as an investment - it was just a daily use grocery-getter https://www.yenko.net/ubbthreads/imag...ns/naughty.gif . Are there special rules for original owners vs a guy who buys the car now as an investment?

signed,
https://www.yenko.net/ubbthreads/imag...lins/crazy.gif

P.S. your opinion is greatly appreciated https://www.yenko.net/ubbthreads/imag...iggthumpup.gif

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

Sorry! Yes, the car is a Capital Asset by the IRC definition, and does not appear to be a 'Collectible' by the IRC definition. So, the 15% rate would apply - I assume the IRS hasn't changed it recently.

Your post used the term 'Antiques' which is one of the terms used in the definition of 'Collectibles' per the Schedule D description. So, the official terminology is 'Collectible' which apparently does not include 'Cars' as 'Collectible' 'Antiques'.

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

15% - THANKS!

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

Marlin,

If a car is a capitol asset can it be placed in a trust??

I guess if someone wanted to give a car to there son could they sell it for a dollar Etc.

Im somewhat less than a padwan when it comes to stuff like this

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

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

[ QUOTE ]
I guess if someone wanted to give a car to there son could they sell it for a dollar Etc.

[/ QUOTE ] Dewpending on the value of the car a father and mother could gift 20K or 10K each[may be a bit higher now]. So if a car was worth under 20K parents could gift thier car to thier son,not sure how it would work on a much larger dollar car,maybe take more than one year to transfer ownner ship??

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

I'm not an expert on trusts, but it would be worth checking out. Keep in mind that for personal property that is inherited from your parents, your 'basis' (read: cost) is the FMV (fair market value) at the time of death. This is good. Here is why.

When schoneye meets his maker, and Joe gets his yellow deuce, it's as if Joe paid the FMV at the time schoneye moves on. That means that the cap gains from '70 until the day it's passed along are not taxed! I'll have to check this out again, as it's been awhile since I looked this one up, but that's the gist of it.

So, I don't think you have to worry about the 'Gift Tax Exclusion' that chuck is alluding to - plus, I think that's just for cash, but not sure.

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

[ QUOTE ]
Marlin,

If a car is a capitol asset can it be placed in a trust??

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

[/ QUOTE ]


Yes, cars can be put in to a trust. We even have the two daily drivers in the family trust.

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

[ QUOTE ]
If you purchase &amp; keep a house more than two
years, you don't have to pay capital gains tax on it.

[/ QUOTE ] The point you are omitting though is that it has to be the home you live in 100% of the time .Not rental, second home,investment property,or vacation home etc etc...You guys really need to look into buying cars,collectibles,investment property,rental property,vacation homes with your retirement accounts,its a little involved but it sure beats having your retirement in a cd at 1.7%,or invested in failing banks and the like and there are no penalties for switching over,the restrictions are a bit overwelming but worth it in alot of cases.

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

Marlin,

What does the IRC say about the current 15% rate if you have no earned income in the same tax year as the capital gain? Does it fall to 5%?

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

[ QUOTE ]
[ QUOTE ]
If you purchase &amp; keep a house more than two
years, you don't have to pay capital gains tax on it.

[/ QUOTE ] The point you are omitting though is that it has to be the home you live in 100% of the time .Not rental, second home,investment property,or vacation home etc etc...You guys really need to look into buying cars,collectibles,investment property,rental property,vacation homes with your retirement accounts,its a little involved but it sure beats having your retirement in a cd at 1.7%,or invested in failing banks and the like and there are no penalties for switching over,the restrictions are a bit overwelming but worth it in alot of cases.

[/ QUOTE ]

I also would not take that statement to the bank, as I believe only the first $250k ($500k MFJ) is tax free, they may have changed this recently though. Keep in mind that the AMT (alternative minimum tax) rules are kicking in for a lot of folks now, so certain tax breaks begin eroding rather quickly with the AMT.

Kendall, I believe the cap gain would put you into a the lowest tax bracket - which I think is 10% now.

Now I know why I don't do tax work - this stuff will drive you nutz! I'll stick to publicly held corp. SEC type work. https://www.yenko.net/ubbthreads/imag...ns/naughty.gif

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

Just FYI, there are some drastic tax code changes here in the UK so I had a discussion with my tax accountants about whether or not I should be changing my domicile and other status. I learned that there is no capital gains tax on automobiles in the UK! This is the only good news I've had in weeks....

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

[ QUOTE ]
I'm not an expert on trusts, but it would be worth checking out. Keep in mind that for personal property that is inherited from your parents, your 'basis' (read: cost) is the FMV (fair market value) at the time of death. This is good. Here is why.

When schoneye meets his maker, and Joe gets his yellow deuce, it's as if Joe paid the FMV at the time schoneye moves on. That means that the cap gains from '70 until the day it's passed along are not taxed! I'll have to check this out again, as it's been awhile since I looked this one up, but that's the gist of it.

So, I don't think you have to worry about the 'Gift Tax Exclusion' that chuck is alluding to - plus, I think that's just for cash, but not sure.

[/ QUOTE ]

He ain't gettin squat. I had the deuce before him, or his mom.I'm takin it with me. https://www.yenko.net/ubbthreads/imag...ins/3gears.gif

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

I just went through this last year and it is 15% for a car owned over a year according to my CPA.

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

Amen

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

I'm not sure, but I don't think a trust can own vehicles in Pennsylvania, but I know that a corporation controlled by a trust can. (I know it makes no sense, but that's our Commonwealth for you!)

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

[ QUOTE ]
I'm not sure, but I don't think a trust can own vehicles in Pennsylvania, but I know that a corporation controlled by a trust can. (I know it makes no sense, but that's our Commonwealth for you!)

[/ QUOTE ]

Trusts can be tricky, so like Brian said - be careful before jumping into something like this. This area is best left to those who specialize in Estates &amp; Trust Taxation, (read: not me! That's why my Deuce is in my will!)

So Schoneye is going to buried in his deuce? https://www.yenko.net/ubbthreads/imag...ns/naughty.gif We'll see what Joe &amp; Chad say about that, you've got two deuces and two sons....

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

Maybe Shoney can try the 'reverse mortgage' theme. Joe &amp; Chad can pay him now for the cars, but he get to keep 'em til he's toes up https://www.yenko.net/ubbthreads/imag...ns/naughty.gif

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

The red deuce is Becky's. Just ask her. She'll be glad to tell you. The yellow one goes to the Oxford Jct Bohemian heritage museum. They're gonna park it by the Lasack brothers hay loader display. https://www.yenko.net/ubbthreads/imag...lins/crazy.gif

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

in Wa a car can be gifted once in its lifetime, all you pay is piddly road taxes, tabs and a small transfer fee, it only matters when you actually sell it. list it in the will as gift to your ??? and leave a bill of sale stating its a gift. https://www.yenko.net/ubbthreads/imag...ns/scholar.gif

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

Sure it isn't a B.S. loader / spreader!!! https://www.yenko.net/ubbthreads/imag...mlins/haha.gif https://www.yenko.net/ubbthreads/imag...ns/worship.gif

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

Mockingbird812, did your friend receive a 1099B on the sale of the car to trigger the CPA telling him he had to pay Cap Gains?

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

Ray,

No 1099. She just knew that she would have to pay Cap. Gains and contacted an accountant.

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

[ QUOTE ]
No idea. I have claimed every penny I have ever made,as painful as that was,and my Cpa has always filed it between 15-25% depending on how long i owned the car so like I said unless they have changed something,that is how i have paid in the past.

[/ QUOTE ]

i dont think the above posts is entirely true.there is alot more to it. https://www.yenko.net/ubbthreads/imag...mlins/flag.gif

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

I'm listening (picture a guy eating popcorn sitting on the edge of his seat) https://www.yenko.net/ubbthreads/imag...lins/laugh.gif