28% Gain Question

[DaveO]

A taxpayer has a 60’s era muscle car in original condition. They paid about $4000 for it and it has sat in storage for several years. I would assume long term capital gain subject to the 28% collectible rate?

They believe the car to be worth about $30,000 and need the money. They are disabled and in need of a special van. I suggest they attempt to do a like kind exchange between the car and a van. Does the fact that the car may be a collectible make the properties “un-like”?

What if they traded the car for a modern “non-collectible” vehicle and then sold that. Would that change the 28% gain to 15% gain?

I think the whole 28% gain thing as it’s applied to things other than coins, jewelry and works of art is a major pain. I read the posts regarding the Violin from a year ago but still can't quite decide on this one.

[jainen]

No

>>Does the fact that the car may be a collectible make the properties “un-like”?<<

No, but the fact that the van is for personal use does.

If they exchanged for a business-use vehicle, it would become a non-collectible, but it would only be a tax-deferred exchange if they actually used it for business, not sold it. What is wrong with paying tax on an investment that realized a 700% yield?

[geekgirldany]

They believe the car to be worth about $30,000 and need the money.

Has the car been restored? If so they might have a good bit of money in it that could count towards the basis. I found this article at Hagerty Auto Insurance:

http://www.hagerty.com/NewsManager/templates/template_prot.aspx?articleid=638&zoneid=2

[DaveO]

The car has not been restored it's original. Her basis is about $4000.

The problem with recognizing the gain is the fact she lives on SS disability that would become taxable and she would lose her property tax exemption if another $26,000 pops onto the return. She would owe another $1,000 or so in income tax on her disability income plus have to pay an extra $2000 or so in property tax.

[Unregistered]

Who needs to know? Who is going to report the sale on a 1099B to the IRS?

[Unregistered]

Now everyone can see why there is a need for the registration of all tax preparers.

Gee, don't report this sale. While you're at it, don't bother to report any Sch C income either for any taxpayer. The new tax simplification rule - only report what's on a 1099 or W-2 form!!!!!!

New York Enrolled Agent

[Unregistered]

Now everyone can see why there is a need for the registration of all tax preparers.

Gee, don't report this sale. While you're at it, don't bother to report any Sch C income either for any taxpayer. The new tax simplification rule - only report what's on a 1099 or W-2 form!!!!!!

New York Enrolled Agent

You forgot "Loose the receipts so you "can't" claim all of your expenses on Schedule C if you're not at the top of the EIC curve."

[Bees Knees]

Who needs to know? Who is going to report the sale on a 1099B to the IRS?

Now everyone can see why there is a need for the registration of all tax preparers.

I doubt mandatory registration of all tax preparers is going to prevent people from getting away with what they can get away with. No amount of government red tape will cause a person to be honest.

The fact is, there are all kinds of ways dishonest people can get away with cheating on their taxes. Sometimes, the more you know, the better you are able to cheat. When you understand how the system works, you understand it’s weaknesses. You understand what you can get away with, and what you need to do not to get caught.

[veritas]

You forgot "Loose the receipts so you "can't" claim all of your expenses on Schedule C if you're not at the top of the EIC curve."

Is that you Irwin?

[Unregistered]

If there is disability involved, perhaps there might be a medical deduction of sorts on schedule A to offset some of the gain.