The IRS and selling personal cars???

[Don_Lightfoot]

Well Mark, I guess the bottom line is whether our Classic Cars are considered "Investments" like Stock Holdings, Art Collections and Rental Properties. If so, then they could possibly be subject to Capital Gains Tax. My personal opinion, considering most of us are not dealers, this should not come into play. A lot of enthusiasts I know buy and register these cars through their own business which is a totally different cup of tea. Would be interesting to really know how our own Canada Customs and Revenue approach this. However, I'm certainly not going to call them to find out

[Jeff H]

I don't know why it should matter to the seller. But going across the border there are some fees involved and that could be an issue. It could also have something to do with Capital Gains, but if he's had the car for a long time then that doesn't come into play.

[MGINLA]

Hopefully this will help. US Supreme Court term of "income" has approved this definition: "Income may be defined as the gain derived from capital, from labor, or both combined, provided it be understood to include profit gained through a sale or conversion of capital assets." In addition, the Supreme Court has repeatedly held that Congress's broad definition of what constitutes gross income was intended to tax all gain unless specifically exempted. As the sale of classic automobile is not specifically exempted, the gain should be taxable. As will all information on the net you should see your Tax Professional. And no, I do not work for the IRS.

[Jeff H]

Hmmm. The problem I have with a definition like that is if I invest $80K into a restoration of my hard earned money that has already been taxed, then I need to sell the car for some unexpected reason and manage to sell it for the amount I paid plus the restoration, I should not have to pay tax on the money I received for the car since it was already taxed. I did not make a profit on the car so therefore no Capital Gains.

[MGINLA]

Jeff, you will not be taxed on the full amount only the profit portion. The profit is over and above your cost in the vehicle. You cannot include a cost for your labor if you do the restoration yourself. You also can avoid the tax if you do a 1031 exchange for another car or cars.