[competentone]

I assume the talk about "deleting the post" is in jest. I doubt tax agents browse these forums looking for violations.

Depending on how it was paid for, "forgetting" to report it might be an option, but if the transaction was in CA, then there are not only Federal capital gains taxes to consider, but state gains taxes too; if the state taxing authority shares data with the DMV, they might catch the omission. Also, if the car was purchased by a dealer, you might get a 1099 on the transaction. (The dealer might decide he needs to do this only after he talks with his accountant, or gets an inquiry from a taxing authority.)

I'm no expert, but was talking with my brother -- who knows a lot more about taxes -- and mentioned the situation. The short of it: You are probably going to be paying the 28% "collectable" capital gains tax on it (that is the Federal end, you may have CA state gains taxes too). Ordinary "maintenance" is not deductible, neither is insurance, storage, registration, etc. (similar to real property). Upgrades could be deducted against the gains.

Of course, this is a situation where you are really being screwed by the tax system. The odds are, you have no real gains; your "gains" are nothing more than inflation -- or a substantial portion of your "gains" are the result of inflation.

The car probably really hasn't become more valuable, the tool (money) being used to measure its value has just become worth less over that 35-year time period.

I've never heard of any legislation, or attempts at litigation, that would change the capital gains laws to make them "adjusted to inflation," but if it were done, it would make the tax system much fairer -- but I guess the government would end up losing a ton of money.

The best way to avoid the high capital gains taxes if you've held an asset for many decades -- and don't really need the money (and it is likely the asset will maintain its value over the rest of your lifetime) -- is to die still owning it. Your heirs get to sell the asset with the stepped-up cost-basis of the value of the item at your death. The capital gains taxes they pay is a lot lower -- it keeps money out of the hands of the government, which is always a good thing.