I recently sold a 1960 corvette I had owned for over 30 years in order to purchase a 1967. This was not a direct exchange, but a sale and purchase. I am going to have a hard time documenting the purchase price in 1975 and all of the incidental costs of renovation and maintenance over 30 years. Does anyone know the best way to treat the long term capital gain or sale of a collectible over such a long period of time? I can list the improvements over time, but wont be able to produce receipts...brad
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Re: IRS,capital gains and corvettes
If you are going to report this as a capital gain, how much are you going to offset the gain for storage fees for the past 30 years? -
Re: IRS,capital gains and corvettes
storage fees....hmmmm I guess this is going to open up the issue to a whole bunch of ideas..The car was privately stored at my house, so I am not out of pocket for that, however I wonder if that portion of my property is subject to a deduction like a home office. And I would think my auto insurance bill for 30 years could be a deduction. Any thing else?Comment
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Re: IRS,capital gains and corvettes
First I will qualify my response by saying that, although a CPA for 30 plus years, taxes are not my specialtiy. That said, I do have some experience with the tax side of the house.
Your capital gain is the difference between what you paid to buy and improve the asset (the basis) and what your received, net of any selling expenses. Basis does not include holding costs (I.E. maintenance, storage, insurance, etc.) which are period costs. Investment holding costs are deducted anually on Schedule A, subject to all those nasty limitations. For most of us, very little drops to the bottom line. You can amend your last 3 years returns if you wish.
Regarding proving basis, do the best you can. If nothing else, write everything down using your best estimate. The key is to document it now, when you file your return and not the day before your are audited. Chances are that you will not be audited in the first place.
Finally, I want to applaud your reporting the gain to the IRS. Many would not. It is not always easy to do the right thing.
Feel free to e-mail me if you have any questions.
DickDickComment
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get cash and the point is moot *NM*
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Re: IRS,capital gains and corvettes
Brad,
Richard is basically correct. I was a tax practitioner for 24 years, in 2001 I sold my Camaro L78 SS convertible thru Russo & Steeles auction in Monterey. I had the cashiers check copy of purchase of the car, all restoration receipts for cost from restoration facility and parts receipts for restoration battery, tires, etc. Costs for transporting to auction facility and consignment fees and expenses of sale.
In the end I actually ended up with a loss, even though car set World record price back then.Comment
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Re: IRS,capital gains and corvettes
So, does this also work the opposite way and you can take a loss on the sale of a car? I understand capital gains and losses on stocks, mutual funds, etc, but not sure how and when it applies to cars. Is it only collectible cars? and if so, who determines what qualifies as collectible?Comment
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Re: IRS,capital gains and corvettes
Not unless you are a dealer. Most of us are considered by the IRS to be "hobbiests" and have to report hobby income and capital gains, but not hobby losses. Guess you can figure that few in Congress are car guys.
The IRS determines what are "collectibles" versus what are investments. Most physical assets such as cars, art, antique furniture, baseball cars, pez dispensers, etc, are "collectibles". One type of physical asset that they consider an investment is precious metals including gold, but not in jewelry form just coins and bullion.
DukeComment
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Re: IRS,capital gains and corvettes
Anyone know if the auction companies or dealers have to report sales to the IRS as brokerages must when you sell a security? In the later case you have to account for the sale of the asset on Schedule D, or you will be hearing from the IRS.
I also think that banks have to report all transactions over $10,000, but there are a lot of those, and they don't necessarily mean an asset was sold - could just be a transfer of funds from on institution to another.
DukeComment
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Re: IRS,capital gains and corvettes
Brad--
In 1980 I bought a tired 62 for very little--late on figured out that it was the Gulf Oil racer. When I sold in in 2002 for 6 figures, I went back and calculated the best I could the costs I had incurred over the years. I reported that to the IRS as Capital gains--haven't heard anything from them in terms of an audit, and it's been 4 years--I tried to be as accurate and honest as possible.Comment
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Re: IRS,capital gains and corvettes
I'm a psychologist, not a CPA, but you might want to ask your tax person about a 1031 exchange. I think this might solve your problems.
Bill #2659Comment
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Re: IRS,capital gains and corvettes
I think BJ is just like Vegas. There is an IRS guy right there for the feds cut.
KEvinComment
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Re: IRS,capital gains and corvettes
You guys are really gonna think I'm being too cautious because the buyer purchased the car with cash. The problem is that no matter how careful I am, suppose the buyer gets in legal or tax trouble and winds up telling someone about the cash purchase. By then its too late for me to say oops, I forgot to mention that sale, and I really didnt make anything on it anyway. I'm not happy about the belief that insurance and maintenance may not be legit additions to basis. Also seems unfair that a collectible loss cant offset a gain, but that seems to be the consensus..And a private response to the posts indicates that the exchange idea only applies to a direct trade-in, not a reinvestment like a home step up basis. Boy those IRS legislators really arent car people! Hope my daughters like big blocks 'cause they may inherit the 67! brad...Comment
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Re: IRS,capital gains and corvettes
Also a bank deposits of more than $10K in cash are reported to the IRS, and the bank are expected and do look for multiple deposits under the limit. You would need a way to laundry the money. (or stuff it in your mattress)
DaveComment
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Re: IRS,capital gains and corvettes
1031 exchanges relate only to real estate (a Vette is personal property).DickComment
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