Capital Gains on muscle car (state of PA)

[x Baldwin Motion]

[ QUOTE ]
.....I have claimed every penny I have ever made,as painful as that was..........

[/ QUOTE ]

Normally I would say it is time for a new accountant after reading a statement like that, but since the IRS is watching us and reading all our posts I'll say "me too, and thanks for being a good taxpayer"

[AutoInsane]

There is a great article on this topic in the October 2007 issue of Sports Car Market. Here is a link but you must be a SCM Platinum Subscriber to access it.

http://www.sportscarmarket.com/Legal...2007/October//

Perhaps someone has the magazing sitting around and can elaborate on what was said in the article.

[mockingbird812]

Or maybe someone could scan it?!

[YENKO DEUCE REGISTRY]

[ QUOTE ]
Trying to help a friend out. Friend bought a nice muscle car brand new in 1970 and sold it in 2007 for a sizeable appreciation. Initially my friend was told by her accountant that a Capital Gains of 15% was owed, but more recently friend was told 28% because "the car is an antique". Does this make sense?

Appreciate any guidance. Thanks!

[/ QUOTE ]

Did a little research, nothing is ever 'clear' with the IRS!

There are 3 'maximum' tax rates, pertaining to different situations. The 3 maximum tax rates are 20%, 25% & 28% - we'll focus on the 28% maximum since it includes a situation for 'collectibles'. Per the IRC:

"Twentyeight percent rate gain includes capital gains and losses from the sale or exchange of collectibles (as defined in section 408(m) without regard to section 408(m)(3)) held for more than one year and certain other types of gain."

So, what is a 'collectible'? Strange as it sounds, the term 'collectible' is defined in the IRC pertaining to Pension Plan Acquisitions! (The logic is such that a pension plan should treat the purchase of a 'collectible' as a distribution from the plan assets... stop snoozing!). Section 408(m) defines 'collectible':

" <font color="red"> (2) Collectible defined

For purposes of this subsection, the term "collectible" means -

(A) any work of art,

(B) any rug or antique,

(C) any metal or gem,

(D) any stamp or coin,

(E) any alcoholic beverage, or

(F) any other tangible personal property specified by the

Secretary for purposes of this subsection.
</font>

What took me on a wild ride was the last statement regarding 'other tangible personal property' - it's a pretty wide net for the IRS to throw out there. So, I ended up in Section 408(m) where our gov. basically is giving themselves an open window to include additional items in the future (read: if there's a run on beanie babies, and the gov wants more $, define it as a collectible, and the tax rate jumps to 28%).

I would conclude that an automobile is not defined in the IRC as a 'collectible' - 'at this point in time', but it's subject to change by certain democratic schoneyeists. Therefore, the sale of an automobile is considered a capital asset, per the IRS instructions for Schedule D: Capital Gains and Losses:

"Capital Asset:

Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car stocks and bonds are capital assets." Yada, yada yada.....

So, whoever gave your friend that snipet about 'collectibles' is pretty sharp! Kudo's or TastyKakes to them! It's always good to know your tax position before you file - and not be doing tax research after the audit notice comes in the mail.

BTW, it sounds like Chad has a good CPA, you don't cheat the government, something about 'death &amp; taxes' being interelated on several levels. Remember, tax planning is encouraged, tax avoidance is unlawful.

PS: Forgot to add, you can't avoid the 28% tax on collectibles by going into a partnership - they still getcha when you sell the partnership interest - just in case any of you enterprising folks were considering this option to protect your 'collectible' wine collection!

[427king]

If you dont vote Republican,it wont matter what is considered long term,short term, or collectible . Capital gains rates will equal regular income. I know a few guys on this site that think a long term investment means they owned it for over 10 days

[Kim_Howie]

I likey likey that word "Schoneyeists"

[mockingbird812]

Marlin,

This is what I heard you say (similar to what Charlie Brown hears when his parents talk)....wah, wah, wah-wah, wah, wah, wah, wah-wah.......

Now - pls don't take offense as I have been accused with having the attention span of a ADHD gnat !

But, could you put that in little-people's terms ?

So in your opinion, the car is NOT a collectible. Right? So the car IS a capital asset, which means a capital gains tax is applied to captital assets? So, what tax rate would that be?

What did you mean by your statement: "So, whoever gave your friend that snipet about 'collectibles' is pretty sharp! " I did not mention anything about collectibles or were you referring to someone elses comment.

Also, my friend's accountant used the term "antique" in order to somehow place it into the higher captial gains category. I thot there were strict guidelines as to what an antique automobile was (vs. i.e. a classic). She never bought the car in 1970 as an investment - it was just a daily use grocery-getter . Are there special rules for original owners vs a guy who buys the car now as an investment?

signed,


P.S. your opinion is greatly appreciated

[YENKO DEUCE REGISTRY]

Sorry! Yes, the car is a Capital Asset by the IRC definition, and does not appear to be a 'Collectible' by the IRC definition. So, the 15% rate would apply - I assume the IRS hasn't changed it recently.

Your post used the term 'Antiques' which is one of the terms used in the definition of 'Collectibles' per the Schedule D description. So, the official terminology is 'Collectible' which apparently does not include 'Cars' as 'Collectible' 'Antiques'.

[mockingbird812]

15% - THANKS!

[COPO 70 RS/Z28]

Marlin,

If a car is a capitol asset can it be placed in a trust??

I guess if someone wanted to give a car to there son could they sell it for a dollar Etc.

Im somewhat less than a padwan when it comes to stuff like this