Avoiding capital gains on vehicle sale

So....If I get this right: Guy has a car he bought for 75k. It has gone up in value to 150K. He likes another car at a dealer for 150K. He trades it in and pays sales tax on the $150k car. Kosher?

Or sells the car for cash. Takes cash to dealer and buys the new $150k car.

 

Sometimes I think about it.

 

You may want to read this; and, perhaps, revise your thinking on "structuring." http://www.nytimes.com/2015/05/01/us/politics/rules-change-on-irs-seizures-too-late-for-some.html

 

up until approx. 1988 the regs only allowed for cost or depreciated value of an asset in the event of a loss with no allowance available for appreciation... since then the regs allow for appreciation of the asset... pay the tax on the appreciated value, to establish a new basis, then write off the loss... no free ride on the appreciation, but is better than a write off on low cost basis... insurance establishes the new value, pay the tax on the adjusted difference

 

Im not so sure where the 25 years part comes in. Perhaps there is a distinction for collector vehicles I am not really aware of.

A section 1031 tax exchange is a tax deferment. It is not tax avoidance.

As far as I can tell, in your example you are differing 150k of gains. You have a 150k basis going into 3 new vehicles. That means your basis in each of the new vehicles is 50k. If you sold one vehicle for 100k, you have a 50k gain. If you sold two vehicles each for 100k then you'd have a 100k gain and so on. If you sold a vehicle for 50k and you have a 50k basis then you have no gain. You also have no loss.

The idea here is when you eventually sell that replacement vehicle you can always do another 1031 exchange and move that basis over, or you take the cash outright and you will pay more in taxes later because that gain from the first deal was simply differed.

Given that we are in (or supposed to be in !!) an inflationary system where money today is worth more than money tomorrow, 1031 exchanges are often a good idea. But as with any speciality, I'd recommend you discuss the intricacies with an expert before pulling the trigger.

 

wow. I've heard of this but just wow. so much for due process or a shred of fact.

 

Thanks for posting that. I read it the other day and thought it appropriate to this thread!

 

Meanwhile I saw a show on TV last week where they were pulling cars over on the freeway and doing illegal searches. On 2 of the cases they confiscated over 100k in case and would not give it back even though they were not charged for anything. My advice would be never travel with large amounts of cash. You basically have no recourse except to spend thousands of dollars on an attorney to get it back. I hate to say this but the freedoms we used to have in this country are being eroded by the day.

 

Thank God I live in Canada.

I can make $100,000,000.00 profit on a cr and the government cannot touch a penny of it.

 

Are you sure about that?

 

+1

 

Unless you did a 1031, you will owe the tax on each sale. From what I understand, the tax is capital gain - not ordinary income, plus the 3.8 Obama + your state tax.

The Tax Side of Dealing in Collector Cars

 

Hey Mike,

You might want to check this out first...

The Blunt Bean Counter: Personal Use Property - Taxable even if the Picasso Walks Out the Door

It would seem LPP and PUP property can both be subject to capital gains up there.

 

I don't have the sense that anyone really has a proper answer for the op's question and some of the additional scenarios as presented by boxerman.

 

I have not seen anyone from the vintage section or the dino section who has recently sold their car (and there have been several) chiming in here.

I suspect we won't either.

 

Food for thought.........Selling your classic car without selling out to the IRS | ClassicCars.com

 

Positive.

 

That's not applicable to buying a car and then selling it.

 

Former CFO here, and I want to preface this by saying that I am not giving advice, just providing information. US Banks do not care or report large deposits unless they are 10k or better in cash. I am absolutely certain of that. Every month, I receive wire transfers for royalties and every month I cash the royalties out of one bank with a cashier's check and move the money to my regular bank. This is not reported and is way over 10k. I've been doing this every month for years, as have other authors.

If you are selected for a random audit, then the IRS will review your bank records, and they will definitely ask for backup for all large deposits.

Personally, I think it's a BS tax law because anyone who's paid to maintain a Ferrari knows that "gain" is not what it looks like. But then, the same goes for houses, and we pay through the nose on investment property also.

 

Same in the UK, no capital gain tax or income tax on cars.
Land of the free !
Well, at least until tomorrow when labour maight get elected in the general election.

 

Same as Canada I mean.
its an empire thing

 

Does this apply to all vehicle sales or just collector cars?

 

Collectors cars are not classed seperatly to regular cars and as such are considered a depreciateing asset by Her majesty's Revenue and Customs.

For now...

 

I imagine you paid more for gas than the rebel colony, United States. $3.60 a gallon in LA. They get you one way or another...

 

Under Ten thousand a month and you are cool. Any more and best of luck.