The IRS and selling personal cars???

Zedder · #1 01-21-2004, 01:45 PM

Being Canadian, I have no idea what the IRS has to do with selling personal cars, so maybe some of you can help me out. I have been trying to put a deal together on a super nice '67 Z-28. We agreed on a price yesterday and started talking about payment and the owner seemed really concerned about the IRS knowing how much he sold the car for??? What does the IRS have to do with selling a personal car? This guy is not in the business and has owned the car for years, so if he's making a profit, does the IRS really care? Thanks for any help you can provide. I like nice, simple car deals and this one is getting a little too complicated

Belair62 · #2 01-21-2004, 02:20 PM

[ QUOTE ]
so if he's making a profit, does the IRS really care?

[/ QUOTE ] Profit is the key word there...I would like to see some knowledgeable info on this myself

Don_Lightfoot · #3 01-21-2004, 02:21 PM

Well Mark, I guess the bottom line is whether our Classic Cars are considered "Investments" like Stock Holdings, Art Collections and Rental Properties. If so, then they could possibly be subject to Capital Gains Tax. My personal opinion, considering most of us are not dealers, this should not come into play. A lot of enthusiasts I know buy and register these cars through their own business which is a totally different cup of tea. Would be interesting to really know how our own Canada Customs and Revenue approach this. However, I'm certainly not going to call them to find out

**Jeff H** · #4 01-21-2004, 02:41 PM

I don't know why it should matter to the seller. But going across the border there are some fees involved and that could be an issue. It could also have something to do with Capital Gains, but if he's had the car for a long time then that doesn't come into play.

MGINLA · #5 01-21-2004, 03:07 PM

Hopefully this will help. US Supreme Court term of "income" has approved this definition: "Income may be defined as the gain derived from capital, from labor, or both combined, provided it be understood to include profit gained through a sale or conversion of capital assets." In addition, the Supreme Court has repeatedly held that Congress's broad definition of what constitutes gross income was intended to tax all gain unless specifically exempted. As the sale of classic automobile is not specifically exempted, the gain should be taxable. As will all information on the net you should see your Tax Professional. And no, I do not work for the IRS.

**Jeff H** · #6 01-21-2004, 03:31 PM

Hmmm. The problem I have with a definition like that is if I invest $80K into a restoration of my hard earned money that has already been taxed, then I need to sell the car for some unexpected reason and manage to sell it for the amount I paid plus the restoration, I should not have to pay tax on the money I received for the car since it was already taxed. I did not make a profit on the car so therefore no Capital Gains.

MGINLA · #7 01-21-2004, 03:44 PM

Jeff, you will not be taxed on the full amount only the profit portion. The profit is over and above your cost in the vehicle. You cannot include a cost for your labor if you do the restoration yourself. You also can avoid the tax if you do a 1031 exchange for another car or cars.

**SamLBInj** · #8 01-21-2004, 04:11 PM

[ QUOTE ]
Being Canadian, I have no idea what the IRS has to do with selling personal cars, so maybe some of you can help me out. I have been trying to put a deal together on a super nice '67 Z-28. We agreed on a price yesterday and started talking about payment and the owner seemed really concerned about the IRS knowing how much he sold the car for??? What does the IRS have to do with selling a personal car? This guy is not in the business and has owned the car for years, so if he's making a profit, does the IRS really care? Thanks for any help you can provide. I like nice, simple car deals and this one is getting a little too complicated

[/ QUOTE ]
I would guess this is one of those double bill of sale deals, One for the actual amount you are paying, probably 35K+ and one for the IRS for $3,000.00 (the title just shows an old 67 camaro)..Remember this though, the IRS is not stupid, some of those agents do collect cars and they know what they are worth. I think Kevin Suydams ZL-1 Vette was originally owned by an IRS agent...Sounds like the guy has had some tax problems or maybe even a child support thing or attached wages...otherwise the full sale with the tax really wont amount to much..the guy should talk to an accountant, he will learn alot...being sneaky always catches up with you...I wonder if the IRS monitors these boards...Ill bet they do..1 to 2 hundred thousand dollar cars changing hands and being discussed here all the time...Big Brother is watching. They always have been and they always will be...

JMHO
Sam

Zedder · #9 01-21-2004, 04:25 PM

Nope...bills of sale haven't even been discussed yet - we never got that far. In fact, this is the second time in recent months were the seller has wanted to be paid all or most of the amount in cash because of the "IRS". Obviously, this is difficult to do long distance, so it causes me a problem. Personally, I really don't think the profit generated by the car would be of much consequence to either the owner or the IRS, so I really don't understand the concern.

Sam, when you find a nice '67 Z for $35,000 please let me know - I'll take two!

MotownMadman · #10 01-21-2004, 04:28 PM

One angle that will work well in this type of situation is a person is allowed to claim $17,000 per year tax free on a hobby, which can be whatever you claim it to be. It has been a few years since I researched this subject, so the amount could have gone up, down, or the law done away with completely. Worth checking into though.
Motown