Income Tax on Sale of Delorean

[lazabby]

As you know the price of Deloreans have been going up. Any of you sell your Delorean (or another car for that matter) for more than you bought it for and pay tax on the gain?

[Bitsyncmaster]

Insist on CASH payment. Just don't put it into your bank account more than $9,999.99 each year.

[Rich]

Disclaimer: I'm not a CPA or an income tax pro

No, I haven't sold a car for a profit before. It looks like it is subject to income tax if you have a net gain.

When I sell our D I plan to account for the cost of the upgrades/improvements made since purchasing it (not reg. maintenance costs) when determining the gain, as explained here.

The Internal Revenue Service (IRS) considers all personal vehicles to be capital assets. Selling that vehicle for less than your purchase price is considered a capital loss, which does not need to be reported on tax returns.......

Selling a vehicle for a profit is considered a capital gain by the IRS, so it does need to be reported on your tax return. But figuring the dollar-amount of that gain is not as simple as comparing your purchase price to your sale price

More details are in this IRS document, particularly the bits about personal use items such as vehicles not used for business purposes. See the notes about Personal Use Property in the Capital Assets section.

The answer might be different for folks who run a business buying low and selling high like BHCC.

Maybe somebody in the stateside community has a better answer for owners, presumably one that will stand up to an income tax audit.

[Helirich]

As you know the price of Deloreans have been going up. Any of you sell your Delorean (or another car for that matter) for more than you bought it for and pay tax on the gain?

While Delorean’s have gone up, it is very unlikely yours has gone up enough to cover costs of ownership. In reality, very few cars do.

[Helirich]

Insist on CASH payment. Just don't put it into your bank account more than $9,999.99 each year.

I’m sure you’re referring to the 10k limit is where you must file paper work. What a lot of people don’t know is the bank must file paper work on you every time you withdraw or deposit $3,000. This only applies to cash. So technically, if your trying to stay “under the radar”, you must withdraw or deposit $2999.99. If you’re really doing this, you should research “structuring” as it applies to cash. It is very rarely enforced, but a scary law just the same.

[Michael]

Insist on CASH payment. Just don't put it into your bank account more than $9,999.99 each year.

Quite possibly the worst advice I could ever think of. Do you really want to walk around with 40k+ in cash waiting to be seized under civil asset forfeiture laws or robbed? Worse yet, find out it's Monopoly money? When you get that cash, how does one deposit that cash while keeping it under 10k per year? Insist on a cashier's check or direct deposit or any type of deposit that ENSURES that your payment is solid and received.

I'm no CPA, and I am sure tax laws vary by state, but selling private property does not fall under income or even capital gains unless you do it as a business. In my state, I believe you are afforded 3 car transactions(sales) per year before any tax issues would arise from business profits.

[MrChocky]

David T was previously handing out tax evasion advice. Surprised he hasn't commented yet.

[Helirich]

Quite possibly the worst advice I could ever think of. Do you really want to walk around with 40k+ in cash waiting to be seized under civil asset forfeiture laws or robbed? Worse yet, find out it's Monopoly money? When you get that cash, how does one deposit that cash while keeping it under 10k per year? Insist on a cashier's check or direct deposit or any type of deposit that ENSURES that your payment is solid and received.

I'm no CPA, and I am sure tax laws vary by state, but selling private property does not fall under income or even capital gains unless you do it as a business. In my state, I believe you are afforded 3 car transactions(sales) per year before any tax issues would arise from business profits.

Ummm, it’s 10K per day. But like I said, you should probably deposit in $2500 chunks over many odd days. If you do it for 15 days in a row, you will surly be in violation of “structuring” .

I love walking around with 40 grand. But you don’t need to walk around with it. Put it in your safe. It’s not like you’re getting any interest in the bank.

[Michael]

Ummm, it’s 10K per day. But like I said, you should probably deposit in $2500 chunks over many odd days. If you do it for 15 days in a row, you will surly be in violation of “structuring” .

I love walking around with 40 grand. But you don’t need to walk around with it. Put it in your safe. It’s not like you’re getting any interest in the bank.

I was responding to Dave's statement of "per year" but I meant per transaction, not per year or day, but what I'm talking about is having that much money in your car or person or even home at ANY time. You are subjecting yourself to it being confiscated, stolen, lost in a fire and whatever bad things can happen when all you need to do is simply demand a cashier's check which eliminates a lot of those concerns. I have a pretty good safe because I own gold and silver but not everyone has a 4,000 dollar safe. I've been down this debate road before here. Do what you want, make 15 trips to the bank...IDGAS.

Also, if you deposit say 9,999 cash dollars in the bank in one transaction, let alone 4...you are not "fooling" anyone. You are actually painting a bigger target on your head and raising more eyebrows than if you just deposited everything at once.

Back to the OP's original question...no I do not think you are subject to paying any "capital gains" on selling one car. The timeframe that you owned the car may come into play but like I said earlier, state laws may differ. If it were me asking, I would simply check with a local CPA and not a DeLorean group. They will probably answer your question(correctly) for free in email correspondence or FB group.

[Rich]

....I'm no CPA, and I am sure tax laws vary by state, but selling private property does not fall under income or even capital gains unless you do it as a business. In my state, I believe you are afforded 3 car transactions(sales) per year before any tax issues would arise from business profits.

You may live in a state with income tax rules that differ from U.S. Federal income tax rules. Federal income tax still applies, of course.

It looks like a U.S. seller is obligated to pay federal income tax on capital gains from the sale of a personal use vehicle as detailed in the two linked documents in Post #3. The rule applies generally to property like cars used for commuting or pleasure (not business use) as well as things like jewelry and even home furnishings. See the IRS definition of a Capital Asset in in IRS Publication 544, Section 2. Yes, it's a sale of private property and, yes, the net gain is taxable.

The rules apply to personal federal income tax. If the car is used for business then see Section 3. I think that's outside the scope of this topic.

Agreeing with your suggestion in your later post today if we have any U.S. tax attorneys or CPAs on the forum perhaps they can enlighten all of us on this question.