sale of antique car

[Super Mom]

I have a client that sold a 1932 Ford in 2016. Her husband bought the frame in 2005 and built on over the years. My client had the car appraised before it was sold. Do I use that appraisal value as the basis?

[Burke]

No, of course not. Basis is the cost. He will have to provide you with that.

[Super Mom]

This is a widow, she has some papers, but this car was built on upholstered, wired, etc over several years. There is no way she has all of those receipts. She doesn't even know all that was done, he was the car expert not her. The antique car dealer that did the appraisal told her she could use that to determine the value for tax purposes. I'm thinking this would not be inherited property since was husband and wife, but sure the car has not been worked on since his death a few years ago.

[Burke]

Well, if he died, it would have gotten stepped-up basis at his death, or if owned jointly -- 1/2 stepped up basis at that time. Was it ever registered with the state as an antique car for license plates and/or personal property taxes? If so, in whose name? If this was not done, then I would treat it as 100% owned by him at his death, and use stepped-up basis as of that date.

[Super Mom]

I just called the man who did the appraisal, and he really doesn't know anything about taxes. However, the DMV uses his appraisals, insurance uses his appraisals, and in divorce proceedings the judge will use his appraisals for the value of the car.

[Super Mom]

Ok, the husband died in 2013. The titles and registration was in his name. Upon his death it all had to be changed to the wife's name. I talked to the appraiser, and he said the value in 2013 was probably a lot more but definitely no less, so we will use that number as stepped up basis. Should that work?

[Super Mom]

I guess my question really is, does the wife get stepped up basis for property owned by the deceased husband?

[taxmom34]

why do you think that husband & wife do not inherit their property when one dies?

[Super Mom]

I guess my thoughts are that both husband and wife own all the property in one name or the other. Guess I'm wrong about that!

[Burke]

I guess my question really is, does the wife get stepped up basis for property owned by the deceased husband?

Yes, it goes to her under operation of law, unless he left it in his will to someone else.

[Burke]

I guess my thoughts are that both husband and wife own all the property in one name or the other. Guess I'm wrong about that!

If you are in a community property state, then both own 100% of everything. Otherwise, it is how it is titled.

[Burke]

Ok, the husband died in 2013. The titles and registration was in his name. Upon his death it all had to be changed to the wife's name. I talked to the appraiser, and he said the value in 2013 was probably a lot more but definitely no less, so we will use that number as stepped up basis. Should that work?

Using stepped-up basis as the cost basis, and sale price as proceeds, do you have a gain? Or a loss? Gain is reportable, loss is non-deductible personal loss.

[TaxGuyBill]

loss is non-deductible personal loss.

Maybe, maybe not.

Assuming the wife did not 'use' the antique car, it might qualify as an 'investment property'.

[taxea]

Using stepped-up basis as the cost basis, and sale price as proceeds, do you have a gain? Or a loss? Gain is reportable, loss is non-deductible personal loss.

I beg to differ Burke...this is a classic car....I would try to find a way to make it an investment so any losses may be taken, although, I doubt the basis vs the sale price would cause a loss unless the widow didn't sell it for appraised or above appraised value.

[spanel]

I beg to differ Burke...this is a classic car....I would try to find a way to make it an investment so any losses may be taken, although, I doubt the basis vs the sale price would cause a loss unless the widow didn't sell it for appraised or above appraised value.

Classic or not, he built the car. He did not purchase it for an investment.

You will almost never get out what you put in to building a car of any sorts. My vote is non deductible personal loss.

Chris