How does the IRS look at selling an old car for big bucks?

I am in a financial bind right now. I suffered a bad injury which is going to lay me up for about two months, and my wife lost her job suddenly the next week. We were getting by OK, but it was "paycheck to paycheck". Her chances of finding another job making the same $ in this economy aren't good. Workers Comp is going to pay me 2/3 of my normal salary, and I am currently physically unable to do any kind of work. I have a 1967 muscle car that I bought the year I graduated high school in 1977. I have kept it all these years, maintained, repaired and done some restoration work on it. The current value guides indicate a value of around $30K for it. I do NOT want to sell it, but that would be enough to pay off my home mortgage and relieve a lot of the stress right now. I keep all my receipts, and in 32 years of ownership have a total of about $4K in the car. If I sold it and paid off my home, would the IRS take a big chunk of the money? I have heard that banks have to report transactions over about $9K or $10K. Is that correct?
Thanks for any helpful advice.

 

Income tax on a car that you already own and decide to sell?
I'm confused.....

 

They wont take any of the money. You already paid taxes on the car when you bought it. The next guy that buys it will be paying taxes on the car. If he buys it for 30k he'll be paying about 2100 in taxes. Its about 70 bucks on every thousand depending on what state you live in.

 

not sure on the tax part, but don't be surprised if you can only sell it for 50% of that "guide" value... you may actually be lucky to get that much- we are all feeling it these days..

 

Investment is around 4k, value is around 30k. Ask the IRS if that's considered a profit.... Since you're planning to immediately spend it by paying off your house it may not count but I have NO knowledge of how this stuff works. You need to talk to H&R Block or some guys like that. Asking that kind of advice on here will only get you 30 completely different confusing answers and there will be at least 2 guys who will tell you to bury the money in the yard & tell them you "found it".

 

I believe I'd talk to a tax accountant in your state.
And I agree that most cars won't bring anything close to book value in a real world sale.
Larry T

 

He is right about the banks having to report any transaction of 10k or more. He is not asking about sales tax. Which is the result of a sale.. that is the states problem to collect from the purchaser. As far as income tax purposes just give a call to a local accountant in your area... they will know a lot more about that .

 

It's called "Capital Gains". Yes if you do a cash deal it will throw up a red flag. If you do a cash deal, just make the payments in $9500 incraments over several weeks. Nothing is flagged under $9999 in cash. Also you can state that you had x amount of hrs in the car, inflation rates etc. You'll be fine. I've sold several classic vehicles over the $30,000 mark and never had an issue. I also bought several over that amount with no issues. Just don't tell your dept of revenue what the actual sale price was. Just put a lower price in the box, saves you the Capital Gains, and the buyer the high personal property tax. That's how I've done it and has worked for years.

 

You better talk to a tax professional as you are getting bad advice here. You indeed are responsible for paying the taxes on your "profits" here. I'm not saying it's right but you are supposed to claim this on your taxes.

I'm not a tax expert and I'm sure there are deductions I'm not aware of.

In reality, very few claim this. Banks will report anything over 10K. (what you never watched The Saprano's).

Easy enough, just make $2500 regular payments on the house.

Unfortunately, as for the law, if you bought a car 20 years ago for $2500 and sell it for $25,000 you owe taxes on that. (no it isn't that simple but thems the facts)

 

Sale price minus what you have in it (the adjusted basis) is your capital gain. Rates of taxation can be as low as 0% on long term capital gains depending on which tax bracket you are in. The tax you already paid was sales tax and has no relationship to the capital gains tax, which you are liable for on your income taxes when you sell a collectible car. I only obey the laws that suit me, so although I have no specific advice, I would figure out a way to hide the transaction.

 

Sorry, but you are wrong about claiming the hours you've put in..IRS will not recognize sweat equity. You can claim anything you want, and often get away with it, but if something in your return triggers an audit, you will have to pay up.

 

Banks in this part of the country now report anything over 3000 in cash. Just deposited 4000.00 and had to fill out IRS report form. Some time ago I needed 8500 to do a deal and if I would have gotten it all at once (bingo) another IRS form. Got reported to the IRS earlier this year for taking the cash from a 9500 check. Anything over the total investment is treated as income/capitol gains. It's dam tough to get by anymore. Using the money to pay off the mortage won't exempt it from taxes. I sell one car a year for a large amount and being as creative as I can I still can't escape some form of Federal and State taxs.

 

I came across something interesting the other day about this subject. If you sell the vehicle on the 'bay, the feds may consider you as having an "on-line store front" and therefore, you realized income from a bidness. That leads me to believe that using classifieds and Craig'slist type of medium (the HAMB?) may be OK. Related, make sure given the recent current events that you see the HBO show about Joe Louis, a national hero, and the way he was hounded.

 

Sell it hide the cash pay house off slowly
If going the other way get the right advise from a tax's guy
Hope it all works out for you and your wife get well
67 what kind of car is it

 

It's also called "unreported income". You need to speak to a GOOD CPA to explain the options you have. Best regards, Rusty

 

I do my own taxes using Turbo Tax and have for several years. It leads you through step by step and while doing mine this year I needed to read a section on "collectables" Yea they are taxable. Now define "collectables".
Consult a CPA that is schooled in this area and remember what you may be dealling with is "tax evasion". That carries a hefty punishment.
Cash transactions can lesson the impact if you know what I mean.
Proceed with caution.

 

Buy ammunition with the money..that will keep them from bothering you..

lol...j/k





not

 

Yes, if you sell it for a profit it would be considered capital gain and subject to capital gains tax... Sucks, but I got popped in 2003 for selling a flatbed trailer for $12k in 2001. After tax and penalty I paid about $7k to the IRS!!! Call an accountant before you do it and verify for sure, it was like kick in the stomach... I was broke, out of business, ready to lose my house and my cars, and then you get a letter two years later from the IRS saying they're going to put a lien on everything you own... Thankfully 8 years of struggle an hard work and we kept the house and cars and are out of debt!!! Hang in there!!! Seriously call a reputable accountant, lots of people get away without reporting it everyday, but you don't want to be the exception!!!
P.S.--- I have always paid my taxes, and thought I was in the right when I did this, Best of luck, I hope things get better for you.

 

So, if you have to pay tax when you profit selling a car, can you claim back when you take a hit on the next 2 or 3 that you sell?

 

Gotta agree with trailer-Ed on this one. But if it will ease your conscious some then let's analyse your situation.....You have owned the car for over 33 years...did you pay taxes, and registration, and plate fees over that time ? And what about the gasoline that you ran through the tank, to keep the internal engine parts from rusting? (Gas taxes) And what makes your car worth it's value today? Climate controlled storage, oil changes, washing, waxing,....what I'm getting at is that if you didn't provide all of the above, at a DEFINITE COST TO YOU, your car would be a worthless pile of iron by now. So if you add in all of the above, there is no profit from the sale. You are recouping your original investment, less your labor, and management of the asset.

I'm not saying to claim all of this sweat equity and file some creative tax return.....What the IRS don't know won't hurt them. IMO you have a heck of alot more money than 4 grand invested here.

 

I'll go out on a limb here. I'm not a tax professional. But these threads came up a lot a few years ago when guys were getting 6 figures for certain muscle cars.

CASH transactions above 10,000 are reported to the US Treasury, this is to prevent money laundering and terrorism. Drug dealers and terrorists don't usually use wire transfers and check/money orders - these are already traceable. Depositing 9,999 or multiple fractions thereof is ALSO reportable as "suspicious activity" designed to intentionally bypass currency transaction reporting.

You are liable to pay taxes on any profits you make from any activity (even illegal activity, remember Al Capone?). Now if I totalled up all my receipts for my cars, I might make a small profit, but it would be negligible.

I realize that I don't have a Ford Thunderbolt or GT40 in the garage. If you do consult a tax person, my feeling is they will be required to advise you "yes" under law to report net profit...but who else is going to tell the IRS (except you?).

 

Buying and selling doesn't seem to work the same way like it should. It's a lot tougher to claim a loss than it is to show a profit. Showing a loss requires every dime to be accounted for and as said before, no sweat equity. Showing a profit, all the IRS has to do is seize your bank account and it's your problem to prove what isn't taxable income. IRS/Guilty untill you prove innocent.

 

A tax lawyer might know....it appears that there are not many tax lawyers in this crowd....

 

Yes, if it's a business loss. Hobbyists are out of luck.

 

Get the money in cash, go to the bank and rent a safe deposit box, put the money in the safe deposit box and take it out when you need it to make your payments.
Paperwork is low as if for a parts car.
Always fly under the radar.

 

I heard that the IRS will immediately attach a value to a caught, record breaking home run baseball. IRS requires it to be declared on your taxes for the year it was caught. That is why they are put up for sale so quickly.

 

i would report it on my taxes for 2011 due to your sudden income loss it should end up being a wash or close to it seeing you have 10 months to go on a reduced income. but like others said ask an accountant or call the irs and ask them before you do it.

 

I believe reporting the sale would only be for those who are engaged in that trade or business. http://www.irs.gov/businesses/small/article/0,,id=148821,00.html

A normal person selling his or her own vehicle is not required to report it.

Cash transaction over $3000 reported by the Bank has nothing to do with the IRS it has more to do with money laundering. http://en.wikipedia.org/wiki/Bank_Secrecy_Act

I've deposited checks and removed money many times from my bank w/o any IRS obligations all in the five figure category. If I were a business that would be different.
I have never been questioned by the IRS. The Patriot Act did change a lot of the reporting proceedures. The IRS knows its going to get its due when the money sits there and gathers interest (a few pennies today). The 1099 interest filing gets them their money. Just because I put 10 grand in the bank doesn't mean the government is entitled to 1/3 of it.

 

It might count as money earned and screw up your weekly payments ,You really need to talk to a lawyer .Or wait till your back to work ,Then after that I would ask a tax expert .

 

huh?