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Paul Christ

Question about Federal Taxes related to the sale of a car

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I'm preparing to sell one of my personally owned cars at a profit, and am wondering about the repercussions when it comes to filing taxes for 2015. I purchased the car in 1997 for $75,000 and will be selling it for around $130,000. Are there any suggestions regarding ways that I can lessen the taxes that I will pay on this sale, and is there a way to determine a ballpark percentage that I can expect the Feds will collect? I do have an appointment to discuss this with my tax guy, but this is keeping me awake at night just thinking about it until I see him. Thanks in advance for any help.

Paul

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Make sure you take an itemized list with receipts to cover all costs you incurred since you purchased it. I also split the profits with my spouse who does not have nearly the income I do. Wayne

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It depends on your tax bracket, but if you can afford a $75K car you're probably not in the lower ranks! You'll probably pay between 15 and 20% of the profit on the car. The important thing is to have good documentation of the basis, i.e. the $75K pain in 1997. If you paid cash and don't have a record of what you paid, it can get sticky, and you may end up paying a lot more tax.

I once asked a friend who was used to buying expensive cars, what do you do when a fellow insists on, say, $75K in cash? He said in that case, you write a check to the person, then mark on the check "refused by seller and cash paid" or some such wording. Then, it's his problem if he's ever audited and IRS comes to you wanting documentation of what you paid him, not your problem with no documented basis in the car.

The real problem is one who bought cars at good prices in the 70's or 80's, and now can't afford to sell them because the tax would be prohibitive. At least that's my excuse to my wife for a while!!!

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I would think a cash receipt would be satisfactory, no? Otherwise, you state sales tax receipt would show what the car cost.

Phil

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One more suggestion. It does not cost to hire a tax accountant at the top of his profession ! It truly pays !!!

Wayne

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If this is a one time or infrequent thing you report it as an ordinary sale minus the basis and any expenses incurred while you owned it.

Capital gains taxes will never be lower than they are now.

Unless you are begging for an audit don't screw with the IRS on big dollar transactions or anything that might cause them to take a second look at your return.

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Thank you very much for the replies to my question. I do have an appointment with my tax guy, but this has really been on my mind and I was looking for information. If anyone has further suggestions, please feel free to post them.

Thank you, Paul

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Yes, Mr. Christ, see that prior thread that people

have referred to. There's evidently a lot of uncertainty,

even among tax professionals, which tax rate

your gain would be subject to. The thread produced a

thoughtfully intelligent discussion, but I don't think the

rate question was ever resolved there.

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imho 15 percent

Thanks, ted sweet. That seems to be the minority opinion, based on my own research, but that certainly doesn't mean that its the wrong opinion. I just get the feeling that it is not actually settled law, and the IRS seems happy to leave it that way. I still think that the best advice is to file under the assumption that the 15% rate is the correct rate, and put the onus on the IRS to change it...making sure that you stash away the extra money for taxes if they do. It's hard to make a decision if to sell under that plan, but if you've already sold or are committed to sell then that's probably the way to go.

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