[schumicat]

I'd think you would get the $70k you put into it as part of the basis. would only make sense.

Originally Posted by Bob Kontak

Hmmmmmm - I am not buying kyle's advice.

Let's say you bought a 1962 two-door Impala that was little more that a rusted frame and body with the front clip and engine missing.

You pay $1,200.

You then dump $30k in parts into restoring the car because you are an awesome wrench and you don't have to pay labor. Oh yeah, you pay a special motor search detective service $4k to find your original big block engine which is in a dune buggy in Mexico. The motor costs you $5k to buy it back then $4k to rebuild it.

All of this costs you a bundle but you have a jewel of a car. Let's say $70k in it and 2500 hours labor.

So the auction house sells it for $130k. Based on the above advice, your tax basis is $1,200 plus the year of sale operational fluff (e.g., $1,000) plus the auction house fee - say 10% - $13,000. OK, say $15k is you tax basis crashed against a $130k sale. That's $115k right up your sphincter into personal income. Um, no.

Deduct every cent from day one that you paid for non-routine maintenance parts and external service providers to refurbish your car. Fair estimates are ok if you don't have the documents. You will get popped in an audit for this (no receipts) if they choose to be jerks, but it is not a crime to be aggressive. It is a crime to be fraudulent.

Gotta eat your labor.