Capital gains tax ?

I’m not a tax lawyer but I’ll give you my thoughts.

If you do everything above board, then yes, you’d have to prove how much you have in it, basis cost (purchase price, parts, labor paid to someone else for restoration). This would be deducted from sale price, if sale price is higher, and that is your capital gain. Your labor, or value thereof, is not able to be added to the basis. Also, you need to define what rate the capital gain tax would be, is it a collectible rate or other, see discussion attached.

Buying another car with funds doesn’t count, you still owe tax on gains.

If you do it “below” board, that is, all in cash, sell you car, and stash it away or buy another, all in cash, then it’s your decision whether to hide that from the government. The problem is, with large sums, they’re easily tracked, so trouble might occur, tax evasion is serious business. Think Al Capone.

In the old days it was no big deal, not significant money. Now, with cars in the 5 and 6 figures, and up, it’s very traceable.

Here’s a link to a AACA forum discussion of the topic.

This comment is in no way approving nor disapproving of how one handles one’s business, just thoughts.

http://forums.aaca.org/topic/248242-capital-gains-taxes-on-old-cars/

Rates and how you file depend on quite a few things. Cars can be treated as a capital gain, but also collectible rates may also apply, and they are higher. Ask your tax professional.

If one has had the car for more than a year,any gain would be treated as a long term capital gain.To determine basis: One would add to the purchase price of the vehicle any restoration costs plus transportation costs to bring the car say from the seller’s place to your place.It is not unlike investment real estate it is your purchase price plus capitalized improvements and upgrades.My research seems to indicate that an antique car would be treated as a collectible like a painting.As for an exchange of one antique car for another antique car,the rules of a section 1031 exchange should apply.Any proposed transaction should be reviewed by a CPA to avoid any traps before entering to the transaction.It is most important to keep good records and documentation.

“.As for an exchange of one antique car for another antique car,the rules of a section 1031 exchange should apply” No. Check a tax attorney Real estate to real estate in 1031 exchanges

I will add the property that is being exchanged has to have been held in an active trade or business or for investment.An antique car can be held as an investment as can be a painting or other collectible.The basis of the item being exchanged carries over to the item being received.I have seen ads for people who facilitate these exchanges with collectible cars.

Bill,

You are correct in that you cannot exchange a real estate investment for an antique car.You can exchange one antique car for another antique car.Example being you have a 1936 Lincoln and you want to trade it for a friend’s 1935 Pierce Arrow.Again though this needs to be done through a qualified intermediary.On real estate one can trade raw land held for investment for income property using a firm like Starker Services.In fact a 1031 exchange is also known as a Starker Exchange.If you have say a duplex and want to move the money into an antique car.probably what one needs to do is sell the duplex,pay the tax and then buy the car.In this case your basis in the car is what you paid for the car.You talk about cars being an investment:If you say bought a 1917 Pierce Arrow in 1953 and sold it today,you no doubt made a nice return but if you bought the car today at an auction it is hard to say but I feel quality or popularity will always hold its value ie a brass radiator Model T Ford is a highly popular car.Again though with cars you have to house them and maintain them.I really feel one needs to be in antique cars because you love them.You also want to buy the best example that you can afford.In the end a 1031 exchange does not get rid of the tax but merely defers the tax to a future date if sold or if held until death gets a stepped up basis to the heirs.

Why not lose money on every deal, like I do, and save all the trouble?

It seems logical that if you sold an investment to buy another investment, the 1031 exchange should apply. But the IRS says it must be “like kind,” real estate for another real estate. Not cars, nor collectibles, nor “other investments.”

I have used Starker Services as an intermediary in real estate exchanges. They are very good and very conservative. BTW “Starker” is based on a real estate challenge with the IRS that based the 1031 ruling.

In order, in a broad sense, is that you sell your real estate to someone else. You never touch the money. It goes to an escrow agent, called an intermediary. He holds your proceeds in his escrow account.

You determine another property, called the “replacement property” or several properties within 45 days of the closing of your original property. The intermediary, at your direction, buys the replacement property. The purchase of the replacement property must take place within 180 days, or six months.

The replacement property is titled in the original property (it can be a conglomerate of several replacement properties). The idea is that your original property has “grown” into a different property.

Your taxable basis in the original property becomes the taxable basis in the replacement property. Sometimes it can be worthwhile to sell the original property, pay the tax, and buy another property that has a much higher taxable basis.

“Like-kind” usually means, not only real estate but how the real estate was used. For instance, if you sell a rental income property, you must “buy” another “rental” property. Not to be used to buy a piece of land unless you rent the land for about a year and then decide you want to develop the land into something else.

I recently used a “reverse 1031 exchange.” I had a buyer on a rental property that was to close at a certain date. I began searching for a replacement property. I found one and placed a contract and put down earnest money.

The buyer of my original property was unable to get funding to buy my property. So I effectuated the “Reverse Exchange.” Starker Services bought my replacement property in the name of SSI, using my funds. Titled the replacement property in the SSI.

SSI then effectuated a loan to me against the property to cover the amount of purchase. In this exchange I was able to have a six-month period to get my “original” property closed, then, in a second closing SSI titled the property to me.

A usual exchange costs about $750. The much more complicated, while also SSI having to hold the title for a period of time, the cost was $3500. I DID make the original buyer, who screwed up the supposedly their buying my original property causing me to pay more money to make a reverse exchange!

Now before anyone attempts an exchange,one needs to research the new tax bill regarding like kind exchanges.When it comes to these collectible automobiles,buy what you like and get the best example you can find.

Time on earth and money. Old story, fellow laying on his deathbed, daughter holding his hand, and he’s crying. Father, are you that sad to be leaving this earth, she asks. No, he says tearfully, but my last dollar is in my pants pocket, and now I’ll never be able to spend it….