Quote:
Originally Posted by pwd72s
Here's a cut & paste from the IRS tax code link you gave...do you see automobiles on this definition of collectibles?
"Collectibles gain or loss. This is gain or loss from the sale or trade of a work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage held more than 1 year. "
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Exactly! That's why I corrected my previous comment with the link and words, "I don't see anything to indicate that an automobile is considered a 'collectible' for tax purposes..."
It would appear, from reading the IRS's publications that capital gains taxes would
not be owed at the "collectibles'" 28% rate.
That said, from my reading yesterday, the IRS clearly states in its publications that an automobile is a capital asset. Subsequently, it would follow that normal capital gains taxes would be owed
if an automobile was sold for more than the cost basis the owner had on it.
Most cars
depreciate with time; Hugh is in a rare situation owning a car that he sold for "substantially" more than what he paid for it 35 years earlier. (As I've explained, I suspect most of that "increase" in "value" is due to inflation -- inflation would account for around a 500% increase -- but the IRS does not recognize inflation when calculating capital gains.) Anytime you sell a personal capital asset (which is essentially any of your "stuff"), it is supposed to be "declared" and any capital gains taxes, if due, are supposed to be paid.
Practically speaking, the IRS would have very limited abilities "proving" what Hugh's cost basis is for the car -- but the IRS normally questions, then makes the taxpayer prove what he has claimed. Since it sounds like Hugh has done an "extensive restoration" on the car, I'm sure his cost basis could be shown to be very close to his selling price -- subsequently, his capital gain would be very small.
