I live in Ca. I was offered a premium price for my car, but I am worried about the best way to avoid crushing taxes on the sale, anyone gone through this?
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The buyer pays the sales tax in their state of registration.
Depending on their State regulations there may be no sales tax to pay at all e.g. NV does not tax private sales only those via a dealer.
Julian
Depending on their State regulations there may be no sales tax to pay at all e.g. NV does not tax private sales only those via a dealer.
Julian
are you referring to sales tax or tax on capital gains?
I am talking about 200kk, I was hopping someone had an escape scenario from the tax burden. moving for a sale is not out.
Your car is capital asset, so yes capital gains tax is payable on the appreciated amount (profit) over your initial purchase cost plus any upgrade dollars you invested in getting the car to it's current condition.
The percentage capital gains tax on classics and collectibles depends what tax bracket you are in, but figure 20% if you owned it more than year (long term capital gain).
The percentage capital gains tax on classics and collectibles depends what tax bracket you are in, but figure 20% if you owned it more than year (long term capital gain).
would their be a sales tax? state tax?
I'm not used to dealing with state taxes, I bet a move to NV is looking attractive right now!
Looks like yes state capital gains is taxed at the highest marginal rate of 13.3% in CA. Sales tax is for the buyer to worry about and dependent on their home state.
Looks like yes state capital gains is taxed at the highest marginal rate of 13.3% in CA. Sales tax is for the buyer to worry about and dependent on their home state.
Find all of the receipts you can. The car insurance also. That was protecting your investment and part of your cost.
Go buy a Turbo tax with state and run that through it or go to a CPA, and pay them for advice on this.
Go buy a Turbo tax with state and run that through it or go to a CPA, and pay them for advice on this.
quote:Originally posted by PanteraDoug:
Find all of the receipts you can. The car insurance also. That was protecting your investment and part of your cost....
Good Point on Insurance! How about garage/storage cost over the years?
I never considered the Pantera being a "capital gain"!
If the car is being considered like Real Property is, then everything that it cost you to maintain it is figured into the equation.
What you pay the landscapers to cut the grass, your heat costs (you need to prevent the pipes from freezing).
The deductible you had to pay on body shop repairs, etc.
The exception would be gasoline to drive it. Even tires, oil changes, wear and tear items should be included.
The longer you own it, the larger the total costs will be. I own mine since 1985.
If you work it right, you will be at a loss unless you had something like a 427 Cobra that you paid $5,000, for in 1975 and just sold it for $1.2 million. That would be a stretch to cover it.
I don't know if you bought a building to house it safely in could be worked in? The accountant I know who tried that is due from release from prison soon I think?
Don't go by what I tell you, get a CPA in your state to do it. Even if you don't have state income tax, you need to pay capital gains on the FED.
What you pay the landscapers to cut the grass, your heat costs (you need to prevent the pipes from freezing).
The deductible you had to pay on body shop repairs, etc.
The exception would be gasoline to drive it. Even tires, oil changes, wear and tear items should be included.
The longer you own it, the larger the total costs will be. I own mine since 1985.
If you work it right, you will be at a loss unless you had something like a 427 Cobra that you paid $5,000, for in 1975 and just sold it for $1.2 million. That would be a stretch to cover it.
I don't know if you bought a building to house it safely in could be worked in? The accountant I know who tried that is due from release from prison soon I think?
Don't go by what I tell you, get a CPA in your state to do it. Even if you don't have state income tax, you need to pay capital gains on the FED.
Doug has some excellent advice, I never considered all your maintenance costs, although online opinion seems to vary.
Turbotax online versions are free until you file so you can upload all the data and see what it spits out.
Better still seek advice from a CPA.
Julian
Turbotax online versions are free until you file so you can upload all the data and see what it spits out.
Better still seek advice from a CPA.
Julian
EVERYTHING you put into the car, including the fancy, smancy engine is deducted from the sale price on capital gains. Everything.
Even the cost of the CPA you need to talk to.
Even the cost of the CPA you need to talk to.
after taking all aspects of ownership into your "cost bases", you determine that in fact you have a loss, can you claim a deduction?
quote:Originally posted by JFB #05177:
after taking all aspects of ownership into your "cost bases", you determine that in fact you have a loss, can you claim a deduction?
Can you deduct a Pantera as a mistress? Maybe in Utah?
Read the IRS rules on Capital Gains. I think if you are a "collector" you pay a higher CG rate than if you are just someone who happens to have bought a car that is worth more when you sell it. As I recall .. 20% vs. 15%. I'm not sure what constitutes a collector.
VERY HELPFUL!!! Thanks you one and all.
Chris,
Why would you even report the sale?
Good luck,
Forest
Why would you even report the sale?
Good luck,
Forest
let me stomp in the water a little...
the method of payment might get it reported to the IRS alone.
https://www.irs.gov/publications/p1544/ar02.html
the method of payment might get it reported to the IRS alone.
https://www.irs.gov/publications/p1544/ar02.html
Most would not feel comfortable with a $200k cash deal.
Most transactions like this are going to be done by wire transfer.
You both sit there with your smart phones while the payment is transferred to the others account.
Any transaction of $10,000, or more is required to be reported to the IRS.
With real property, there is a time period given to reinvest. I don't know what you do with a car.
So I guess this is like winning a lottery. You are going to loose a significant amount to taxes UNLESS you document your expenses.
I would also point out that your CPA is going to probably want a percentage as a fee in order to save you taxes.
As far as cash transactions go, here's a thought, if one was in the category of being struck by lightening and YOU and ONLY YOU discover a very significant find sitting concealed some where AND SOMEHOW the subject of the owner offering the vehicle to you, one of the selling points for a reasonable cash transaction would be the above, technicalities.
That is, if you want a ga-zillion for the thing, then everyone is going to need a lawyer, whitnesses, a bodyguard and a CPA.
The sale needs to be documented, etc. and the seller is going to probably loose something like 50% in fees and taxes.
So the pitch is, if you take cash, the seller is getting something out of nowhere and can hide whatever they want.
That argument would seem likely to go nowhere with the nature of the seller, but who knows? If they have half a brain and think about it, it could happen.
There was a genuine GT40 sitting in a garage in Beverly Hills. All sorts of old bed mattresses and other stuff were piled on top of it.
Now the car as I understood it was being sold by the son. The father had bought it as a used race car back in 66 or 67. He was going to restore it but never quite got around to it.
The father passed away and the son had control of the car.
Now normally this is one of those "finds" that should have been sold for a few thousand dollars. The son wasn't really a car guy but started to investigate. I heard the sale number was $12million to a private buyer.
I can't count that high plus I wouldn't even be able to tell if they were real $100's or phony. The new ones all look phony to me.
It's a nice number BUT it is a real problem if you ask me. Even if it was a cash transaction, how much room does the money take in the house and how much medication do I need to take in order to sleep in that house with it?
Let's not even mention house invasions and guns and such, ok?
State DMV agencies have gotten smart on this subject though when you go to register. There is a "classic car value" list.
If you go in there with a bill of sale for $100 for a 65 427 SC, you are going to set off all sorts of flashing red lights.
I personally know of someone who advises on this specific subject with Cobras. Most of the buyers are "Captains of Industry". The purchases are completed by their "on staff attorneys or permanent on retainer attorneys".
He described it to me as very much like a "house closing". His full time job is a "real estate agent" so he is familiar with the type of procedure".
It all kind of puts the kibosh on a real barn find where the owner just wants you to tow the car away and you can keep the chickens.
...oh. With those kinds of expenses EXPECT an audit by the IRS folks. Don't counterfeit those receipts.
They probably won't put you in jail. They will just fine you and if you can't pay, take your house.
Most transactions like this are going to be done by wire transfer.
You both sit there with your smart phones while the payment is transferred to the others account.
Any transaction of $10,000, or more is required to be reported to the IRS.
With real property, there is a time period given to reinvest. I don't know what you do with a car.
So I guess this is like winning a lottery. You are going to loose a significant amount to taxes UNLESS you document your expenses.
I would also point out that your CPA is going to probably want a percentage as a fee in order to save you taxes.
As far as cash transactions go, here's a thought, if one was in the category of being struck by lightening and YOU and ONLY YOU discover a very significant find sitting concealed some where AND SOMEHOW the subject of the owner offering the vehicle to you, one of the selling points for a reasonable cash transaction would be the above, technicalities.
That is, if you want a ga-zillion for the thing, then everyone is going to need a lawyer, whitnesses, a bodyguard and a CPA.
The sale needs to be documented, etc. and the seller is going to probably loose something like 50% in fees and taxes.
So the pitch is, if you take cash, the seller is getting something out of nowhere and can hide whatever they want.
That argument would seem likely to go nowhere with the nature of the seller, but who knows? If they have half a brain and think about it, it could happen.
There was a genuine GT40 sitting in a garage in Beverly Hills. All sorts of old bed mattresses and other stuff were piled on top of it.
Now the car as I understood it was being sold by the son. The father had bought it as a used race car back in 66 or 67. He was going to restore it but never quite got around to it.
The father passed away and the son had control of the car.
Now normally this is one of those "finds" that should have been sold for a few thousand dollars. The son wasn't really a car guy but started to investigate. I heard the sale number was $12million to a private buyer.
I can't count that high plus I wouldn't even be able to tell if they were real $100's or phony. The new ones all look phony to me.
It's a nice number BUT it is a real problem if you ask me. Even if it was a cash transaction, how much room does the money take in the house and how much medication do I need to take in order to sleep in that house with it?
Let's not even mention house invasions and guns and such, ok?
State DMV agencies have gotten smart on this subject though when you go to register. There is a "classic car value" list.
If you go in there with a bill of sale for $100 for a 65 427 SC, you are going to set off all sorts of flashing red lights.
I personally know of someone who advises on this specific subject with Cobras. Most of the buyers are "Captains of Industry". The purchases are completed by their "on staff attorneys or permanent on retainer attorneys".
He described it to me as very much like a "house closing". His full time job is a "real estate agent" so he is familiar with the type of procedure".
It all kind of puts the kibosh on a real barn find where the owner just wants you to tow the car away and you can keep the chickens.
...oh. With those kinds of expenses EXPECT an audit by the IRS folks. Don't counterfeit those receipts.
They probably won't put you in jail. They will just fine you and if you can't pay, take your house.
I think there may be one solution .. sell your car abroad where the DMV-equivalent does not connect with the US. Then all you have to do is figure out a way to handle the money .. not hide but get it in smaller payments, maybe over time. As they say .. check with your CPA before making a decision.
quote:Originally posted by forestg:
Chris,
Why would you even report the sale?
Good luck,
Forest
Um, because that would result in fraudulent tax filing!
You think the government doesn't know when $200K is dropped in your account!
Do a 1031 exchange. IE buy another car. If you speak to your CPA you may even be able to deduct expenses such as engines tires etc and then buy another car with the amount that you can no longer reasonably deduct. SPEAK TO YOUR CPA
quote:Originally posted by ItalFord:
Do a 1031 exchange. IE buy another car.
BEST.... IDEA..... EVER!!!!