Capital Gains on muscle car (state of PA)

[mockingbird812]

I'm listening (picture a guy eating popcorn sitting on the edge of his seat)

[nuch_ss396]

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.

Now this is going to move into a politically toned topic soon.
Nuch

[YENKO DEUCE REGISTRY]

[ 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.

Now this is going to move into a politically toned topic soon.
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.

[AutoInsane]

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.

[mockingbird812]

Or maybe someone could scan it?!

[427king]

[ QUOTE ]
If you purchase & 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.

[rubbinisracing]

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%?

[YENKO DEUCE REGISTRY]

[ QUOTE ]
[ QUOTE ]
If you purchase & 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.

[Jeff Murphy]

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....

[YENKO DEUCE REGISTRY]

[ 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?

Appreciate any guidance. Thanks!

[/ 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. 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! 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. Remember, tax planning is encouraged, tax avoidance is unlawful.

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!