Capital Gains on muscle car (state of PA)

[mockingbird812]

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

[Bill Pritchard]

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?

[427king]

[ 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 .

[mockingbird812]

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!

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...

[YENKO DEUCE REGISTRY]

[ 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!

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.

[NovaMob03]

So, what happens if you lose money on a classic car? Can you write off the loss?

[427king]

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.

[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.

[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???