Unless I were in the business, like you Adam, and I were to sell a car at a substantial profit (2 or 3 times the original cost) for cashwhich I had owned for several decades , how would the IRS know about the deal and secondly how would they know what my cost basis were ?
I forgot to answer your 2nd question. Chances are the IRS would be notified by your bank or local car dealer. If you deposited $10,000 or more into your bank in cash, they would be notified, or three deposits of $8000 in a 4 week period, etc.
Or if you went to the RV dealer and bought an RV for cash, they would notify the IRS.
The problem with cash is unless you owe your booky, there isn't a lot you can do with it.
www.unobtanium-inc.com
Check out my Barn Find column in the Registry magazine, always looking for good stories.
OK assuming a private deal and I were to deposit the proceeds into my savings accent, I would only owe the IRS if I had a a gain on the deal which requires they know the cost basis. Further assuming I had acquired the car some 10+years earlier (beyond the required document retention period), it seems to me I could sate any number I wished and there would be no way the IRS could prove otherwise.
OK assuming a private deal and I were to deposit the proceeds into my savings accent, I would only owe the IRS if I had a a gain on the deal which requires they know the cost basis. Further assuming I had acquired the car some 10+years earlier (beyond the required document retention period), it seems to me I could sate any number I wished and there would be no way the IRS could prove otherwise.
Larry,
I'm not a tax expert and since we do it as a business, we pay taxes on cars we sell, but my gut tells me that if you did deposit more than $10,000 into any of your accounts the IRS would be notified, and if they investigated, well, it's like the ex-CIA guys say,
"You're only innocent, until you're investigated."
www.unobtanium-inc.com
Check out my Barn Find column in the Registry magazine, always looking for good stories.
The pot growers ( ops, sorry, compassionate medical marajua providers ) out here in CA have been aware of the hazards of flying with large sums of cash for a few years. They buy a new refrigerator, or such,unseal the packing then fill it with product. After re sealing it, renting a one way U-haul, and a road trip to some big city they take the train back home. A full reefer of reefer is one hundred and twenty pounds. Return trip is one money belt and two hundred and fourty thousand cash.Four or more trips a year from one grow house, and after you wash the money thru your " legal " business, you are living large. Legalize it and tax the hell out of it like my drug of choice, dry hopped IPA.
OK assuming a private deal and I were to deposit the proceeds into my savings accent, I would only owe the IRS if I had a a gain on the deal which requires they know the cost basis. Further assuming I had acquired the car some 10+years earlier (beyond the required document retention period), it seems to me I could sate any number I wished and there would be no way the IRS could prove otherwise.
Larry,
I'm not a tax expert and since we do it as a business, we pay taxes on cars we sell, but my gut tells me that if you did deposit more than $10,000 into any of your accounts the IRS would be notified, and if they investigated, well, it's like the ex-CIA guys say,
"You're only innocent, until you're investigated."
I saw an article recently saying that the $10,000 thing has gone away as everyone knew about it and made transactions just below that number. Instead, the IRS is now using a floating number that can change daily or weekly, some days, $8900 then $9400 on others.
TomDoherty wrote:
I saw an article recently saying that the $10,000 thing has gone away as everyone knew about it and made transactions just below that number. Instead, the IRS is now using a floating number that can change daily or weekly, some days, $8900 then $9400 on others.
In that case, then, the cash should be buried in a coffee can.
Brian
Welcome to the era of policy-based evidence-making.
$10000 only matters for cash. Checks over $10000 are not an issue.
Selling price is between the buyer and seller. If there is no 1099, then the only documentation of the selling price would be on the sales tax declaration for vehicle registration. Figure the rest out.
OK assuming a private deal and I were to deposit the proceeds into my savings accent, I would only owe the IRS if I had a a gain on the deal which requires they know the cost basis. Further assuming I had acquired the car some 10+years earlier (beyond the required document retention period), it seems to me I could sate any number I wished and there would be no way the IRS could prove otherwise.
Larry,
I'm not a tax expert and since we do it as a business, we pay taxes on cars we sell, but my gut tells me that if you did deposit more than $10,000 into any of your accounts the IRS would be notified, and if they investigated, well, it's like the ex-CIA guys say,
"You're only innocent, until you're investigated."
I saw an article recently saying that the $10,000 thing has gone away as everyone knew about it and made transactions just below that number. Instead, the IRS is now using a floating number that can change daily or weekly, some days, $8900 then $9400 on others.
My bank guy explained they are supposed to report anything in the range of $10,000, espcially if it happens more than a couple of times a month. There was recently a case where a lady had her bank account seized when she made cash deposits of $9000 weekly. TX seems to be very keen on civil forfeiture, so watch out Al.
Very interesting bit of info in that document Mark,...especially the first and second sentences here.
The tax rate on most net capital gain is no higher than 15% for most taxpayers. Some or all net capital gain may be taxed at 0% if you are in the 10% or 15% ordinary income tax brackets. However, a 20% rate on net capital gain applies in tax years 2013 and later to the extent that a taxpayer’s taxable income exceeds the thresholds set for the new 39.6% ordinary tax rate ($406,750 for single; $457,600 for married filing jointly or qualifying widow(er); $432,200 for head of household, and $228,800 for married filing separately). For more information, refer to Publication 505, Tax Withholding and Estimated Tax.
In my experience in business and personally these are some absolutes...
banks are very nervous about large cash deposits even from a long time business customer that sells big ticket items
the IRS has extreme authority and many complex laws that they can utilize to make even an innocent tax under payer very unhappy
the IRS has no sense of humor or compassion - their idea of fun is to visit your business and announce themselves to your employees
the IRS blasts you with threatening letters but does not respond to your letters or phone calls - in my case the IRS only responded after I contacted my Congressman
FYI business owners -your professional payroll company is not bonded and the IRS will make you pay your tax a second time if the payroll company cheats you - additionally the IRS won't send the business the late notice until at least a couple of quarters pass without payment so you won't know you are being cheated
the state sales tax people are reputed to be just as bad but I have no direct experience, just reports from fellow businessmen
Mark's post link pretty much sums up the way the IRS will justify the tax they take when you sell your car. I wonder if they will want 15% or 28%(they really want 100%). You can all tell yourselves that the IRS won't find out but I wouldn't be so sure that they don't know the approximate financial impact of the ownership change of most old cars. After all the state of PA checks NADA values for every car they title to make sure they get their sales tax. You think the IRS can't figure out what your sunroof coupe is worth? Maybe not but if they do your life will be a living hell. Make sure you get good advice.
If I get buried in my Speedster will they charge the tax to the estate anyway? Sure they will, free stuff is expensive.
'57 Speedster
'59 Sunroof
'60 Devin D Porsche Race Car
'63 Cabriolet "Norm"
'67 911 S Original Owner
'03 Ferrari 575M
'09 Smart Passion
,...you seem to know an awful lot about the gritty details of the process,...hmmm....
