Buy

Advice on tax implications of selling and buying a car?

Discussion in '348/355' started by MRF40@yahoo.com, Jul 20, 2021.

  1. MRF40@yahoo.com

    MRF40@yahoo.com Formula Junior

    Jan 1, 2006
    502
    Planet Urf.
    Full Name:
    like whut? Ralph??
    How do I minimize my tax liability if I am going to sell a car and replace it with a purchase?
     
    Stand4x likes this.
  2. To remove this ad click here.

  3. Ferrarium

    Ferrarium F1 Rookie
    Rossa Subscribed

    Jul 28, 2018
    3,421
    Central NJ
    Full Name:
    Eric
    So this seems like an odd question but... a bill of sale saying you sold it for $10,000 and a new bill of sale for new purchase saying you bought it for $10,000 works well and is a well worn path.

    Interesting, here in NJ no bill of sale required for a purchase. They just ask you. I bought my 348 very cheap.

    Sent using FerrariChat.com mobile app
     
    Yassa likes this.
  4. MRF40@yahoo.com

    MRF40@yahoo.com Formula Junior

    Jan 1, 2006
    502
    Planet Urf.
    Full Name:
    like whut? Ralph??
    Hmmn.. let me try to be more specific.. I plan to sell a car that I bought for 50K for 100k, so 50K gain. I plan to "re-invest" all of that money in another car costing 100K. Is there any way to defer the tax on the gain? What about buying thru a dealer? is there a 1031 option?
     
  5. Ferrarium

    Ferrarium F1 Rookie
    Rossa Subscribed

    Jul 28, 2018
    3,421
    Central NJ
    Full Name:
    Eric
    The car that you bought for 50k and sold for 100k get a bill of sale saying you sold it for 30k.

    The car you're going to buy have them write a bill of sale send you bought it for 30k.

    Sent using FerrariChat.com mobile app
     
  6. 19633500GT

    19633500GT F1 Veteran
    Rossa Subscribed

    Nov 9, 2010
    8,440
    Blueberry
    Full Name:
    Muffin-Tops
    Highly recommend against giving the advice of evading short/longterm capital gains, and/or tax evasion. Just my $.02, it's the internet...you never know who is watching.

    You can 1031 on a car sale, and purchase, start here, https://www.1031exchange.com/1031-exchange-rules-allow-purchase-investment-automobiles/ and further more, obviously consult your accountant, they should be able to walk you through it.

    If you were selling your car TO the dealer, and purchasing from them (ie. a trade in) then (maybe state dependent?) you'd be able to realize less sales tax liability towards your new purchase, but how you explained it, you're selling privately and then, undecided on who you're buying from (just a guess?).

    @Texas Forever may have some keen words of wisdom here...
     
  7. To remove this ad click here.

  8. MRF40@yahoo.com

    MRF40@yahoo.com Formula Junior

    Jan 1, 2006
    502
    Planet Urf.
    Full Name:
    like whut? Ralph??
    Naw, Im way too cute for jail.
     
  9. A348W

    A348W Formula 3

    Jun 28, 2017
    1,543
    North Wiltshire, UK
    Nothing to pay in the uk!
     
  10. plastique999

    plastique999 F1 Veteran
    Silver Subscribed Owner

    Nov 9, 2008
    6,611
    SoCal
    Full Name:
    Edward
    I’m interesting in this topic as well… I have some cars that have appreciated but my CPA told me that cars do not fall into the 1031 exchange category?
    Any other advice?


    Sent from my iPhone using Tapatalk
     
    Texas Forever likes this.
  11. Smiles

    Smiles Moderator
    Moderator Owner

    Nov 20, 2003
    15,185
    Pittsburgh, PA
    Full Name:
    Matt F
    I absolutely agree with the first part here.

    But before selling that car, carefully read the linked article and understand 1031 exchanges. They are for “anything held for productive use.” I find it very hard to argue that any collector car falls under this definition and not a “collectible item”. And any increased in value of a collectible is taxed at the income tax rate of the seller, not as a capital gain, no matter how long you’ve owned the collectible.

    Matt
     
    MRF40@yahoo.com likes this.
  12. To remove this ad click here.

  13. Texas Forever

    Texas Forever Four Time F1 World Champ
    Rossa Subscribed

    Apr 28, 2003
    49,539
    Texas!
    That is correct. You can't do a 1031 exchange on cars anymore.
     
  14. Texas Forever

    Texas Forever Four Time F1 World Champ
    Rossa Subscribed

    Apr 28, 2003
    49,539
    Texas!
    Generally, losses on a car are non-deductible because it is a "personal-use" asset.

    If you are not a car dealer, any gain is a capital gain. Now, here's where it gets sticky. The regular capital gain tax rate is 20%. But if you sell a "collectible," the capital gain rate is 28%. What's the difference between a car and a collectible? It depends on how good your CPA is. I take the position a car is not a collectible, unless you brought it as an investment. But if you brought a car, drove it or whatever, then got lucky because it went up in value, I don't believe that is a collectible. YMMV.
     
    ShineKen and plastique999 like this.
  15. plastique999

    plastique999 F1 Veteran
    Silver Subscribed Owner

    Nov 9, 2008
    6,611
    SoCal
    Full Name:
    Edward
    So you’re saying I’m screwed


    Sent from my iPhone using Tapatalk
     
    Texas Forever and Shark01 like this.
  16. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    4,423
    A wise philosopher once said......
     
  17. Shark01

    Shark01 F1 Rookie

    Jun 25, 2005
    4,423
    Mo Money, Mo Problems
     
    Yassa, ShineKen and plastique999 like this.
  18. Ferrarium

    Ferrarium F1 Rookie
    Rossa Subscribed

    Jul 28, 2018
    3,421
    Central NJ
    Full Name:
    Eric
    These are good problems no? :p
     
  19. johnk...

    johnk... F1 Veteran
    Owner

    Jun 11, 2004
    8,959
    Not only that, but if you are receiving SS and Medicare, since your AGI will go up, more of your SS will be taxable, and they will take more out of SS for Medicare Part B. Everybody wants some!
     
  20. Innovativethinker

    Innovativethinker F1 Veteran
    Silver Subscribed

    Aug 8, 2009
    6,084
    Bear Creek, Ca.
    Full Name:
    Mark Jones
    A question for anyone that would know, how does the IRS track private party transactions?

    Some people only deal in cash.

    To the OP, was the purchase price of the car you are selling recorded somewhere?
     
  21. johnk...

    johnk... F1 Veteran
    Owner

    Jun 11, 2004
    8,959
    If you make a deposit of $10,000 or more in a single transaction, your bank must report the transaction to the IRS.
     
    Yassa likes this.
  22. Innovativethinker

    Innovativethinker F1 Veteran
    Silver Subscribed

    Aug 8, 2009
    6,084
    Bear Creek, Ca.
    Full Name:
    Mark Jones
    yes, but not 9,900 a week
     
    Yassa and plastique999 like this.
  23. 19633500GT

    19633500GT F1 Veteran
    Rossa Subscribed

    Nov 9, 2010
    8,440
    Blueberry
    Full Name:
    Muffin-Tops
    Sure, but when they call you and ask about structuring, have fun with that explanation...
     
  24. Ferrarium

    Ferrarium F1 Rookie
    Rossa Subscribed

    Jul 28, 2018
    3,421
    Central NJ
    Full Name:
    Eric
    Yes but a wall safe in your home is not a bank.
     
    Yassa, jjtjr and Innovativethinker like this.
  25. PhilB

    PhilB Formula 3
    Silver Subscribed Owner

    Feb 17, 2004
    1,813
    NYC, USA
    Full Name:
    Phil
    Why not consider working with a consignor to handle the sale/buy/trade - in this manner you can offset the sales tax on the new car by the trade-in value on the current car. Obviously the consignor gets a vig, but you should be able to negotiate that if all he's doing in the transfer.

    As for the IRS, how would they even know you bought/sold a car for a profit? Does the DMV have a feed into the IRS? I doubt it.
     
  26. johnk...

    johnk... F1 Veteran
    Owner

    Jun 11, 2004
    8,959
    I assume you are joking, but:

    "Even if your deposits don’t exceed the $10,000 threshold, your bank could still consider them worthy of reporting. The IRS requests financial institutions to watch for suspicious activity, which could mean large transactions or series of similar deposits over time. If your bank flags you for this type of activity, you might not know that you’re considered suspicious."
     
    randkin likes this.
  27. BMW.SauberF1Team

    BMW.SauberF1Team F1 World Champ

    Dec 4, 2004
    13,560
    Get a dealers license and buy/sell cars that way if you are in it for business/investment purposes and not pleasure?
     
    ShineKen and plastique999 like this.
  28. 19633500GT

    19633500GT F1 Veteran
    Rossa Subscribed

    Nov 9, 2010
    8,440
    Blueberry
    Full Name:
    Muffin-Tops
    see my comment about structuring ...
     

Share This Page