Sale of personal auto

[gman]

I have an individual that would like to report the sale of an auto. I guess they are hoping for a loss. How is this handled--schedule D but do
we allow for any depreciation of auto. Or just look at sales less cost, limited to 3,000.
Do majority of you report sale of auto-capital asset?

[kathyc2]

You report it the same way you report a loss on a personal residence.

[taxea]

Do Sch D if you have time to waste. Personal loss on sale is not deductible

[Gretel]

To simply answer your question: No reporting of sale of personal asset if a loss, but a gain would need to be reported.

[Lion]

Did the auto have business use? Then, adjusted cost basis would be lower. Might even have a gain. Did you run the numbers yet?

[gman]

thanks

personal auto. so will not report

[Roland Slugg]

You have asked a question that some visitors to this site would, and apparently have judged to be a foolish one, unworthy of an honest reply. Two people even felt compelled to post mildly sarcastic and highly unprofessional replies ... certainly unkind ones to say the least.

It is true that losses on sales of personal assets are not deductible. Such losses can't even be used to offset other gains from sales of personal assets. Accordingly, they don't have to be reported on a tax return, but they can be reported, and in certain cases they must be reported.

You wrote that your client "would like to report the sale of an auto," adding that there would be a loss on the sale. Even though the loss would not be deductible, you can accommodate his request if you wish to do so. Report the sale on F-8949 (not on Schedule D as mentioned in one of the unkind replies above). Enter code "L" in column (f) and the amount of the loss in column (g). This will result in zero gain or loss on that line. See the instructions for F-8949.

You mentioned depreciation, making me wonder of the vehicle was a business asset at some time in the past, then converted to personal use. If so, the depreciation taken while it was a business asset serves to reduce its basis. If the vehicle's selling price was more than its adjusted basis, then there was actually a gain on its sale. If that's the case, report the sale on F-4797, not F-8949. The gain will be taxable as ordinary income because of §1245 recapture. I don't think this applies to your set of facts but am covering it here just in case it does.

Finally, there is one fairly common situation when the sale of a personal asset at a loss must be reported on F-8949. That's when the asset sold was real estate, such as a second home used only for personal purposes. In such cases there will usually be a form 1099-S issued, so the sale must be reported in order for the IRS's matching protocol to find the offsetting amount on F-8949.

[mastertaxguy]

Thanks for saying what many of us were thinking

You have asked a question that some visitors to this site would, and apparently have judged to be a foolish one, unworthy of an honest reply. Two people even felt compelled to post mildly sarcastic and highly unprofessional replies ... certainly unkind ones to say the least.

It is true that losses on sales of personal assets are not deductible. Such losses can't even be used to offset other gains from sales of personal assets. Accordingly, they don't have to be reported on a tax return, but they can be reported, and in certain cases they must be reported.

You wrote that your client "would like to report the sale of an auto," adding that there would be a loss on the sale. Even though the loss would not be deductible, you can accommodate his request if you wish to do so. Report the sale on F-8949 (not on Schedule D as mentioned in one of the unkind replies above). Enter code "L" in column (f) and the amount of the loss in column (g). This will result in zero gain or loss on that line. See the instructions for F-8949.

You mentioned depreciation, making me wonder of the vehicle was a business asset at some time in the past, then converted to personal use. If so, the depreciation taken while it was a business asset serves to reduce its basis. If the vehicle's selling price was more than its adjusted basis, then there was actually a gain on its sale. If that's the case, report the sale on F-4797, not F-8949. The gain will be taxable as ordinary income because of §1245 recapture. I don't think this applies to your set of facts but am covering it here just in case it does.

Finally, there is one fairly common situation when the sale of a personal asset at a loss must be reported on F-8949. That's when the asset sold was real estate, such as a second home used only for personal purposes. In such cases there will usually be a form 1099-S issued, so the sale must be reported in order for the IRS's matching protocol to find the offsetting amount on F-8949.

Thank you for saying what many of forum members were thinking.

As you point out, as in all things tax it depends on the facts, and circumstances and of course basis.

[kathyc2]

[QUOTE=Roland Slugg;170453]
You wrote that your client "would like to report the sale of an auto," adding that there would be a loss on the sale. Even though the loss would not be deductible, you can accommodate his request if you wish to do so. Report the sale on F-8949 (not on Schedule D as mentioned in one of the unkind replies above). Enter code "L" in column (f) and the amount of the loss in column (g). This will result in zero gain or loss on that line. See the instructions for F-8949.


A preparer should probably consider if they are violating any ethics before doing so. If a preparer charges more to produce a form which is neither required or of tax benefit, are they being ethical? If preparer generates business because taxpayer tells his buddies to go there because he let him take a loss on his vehicle, ethics are probably violated unless preparer makes it clear that there is not a lower tax by "taking" loss on vehicle.