Capital Gains on muscle car (state of PA)

[YENKO DEUCE REGISTRY]

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.

[427king]

[ 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?? 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.

[YENKO DEUCE REGISTRY]

Leave that for another thread.

[mockingbird812]

"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?

[Zedder]

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???

[YENKO DEUCE REGISTRY]

[ 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.....

[Roof]

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

[427king]

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.

[COPO 70 RS/Z28]

I knew I should have stayed in that Holiday in Express!!!





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

[YENKO DEUCE REGISTRY]

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.