by Kristin P. Sinclair – A Accu Tax – June 19, 2022
William and his bride Sherry have been married for 47 years, are getting ready to retire and they plan to say goodbye to much of what they have had in the family home for decades they are opening up space in the home so that it is less crowded and they are also getting rid of much of what is in that 3 stall garage that they have decided they do not need anymore.
They have an antique car that has been a lot of fun, they have enjoyed going to various antique car shows. They have enjoyed the wonderful conversations that the antique car has been the topic of conversation. William has kept excellent records of the purchase of the vehicle and each dollar that went into making that treasure of joy what it is today.
William has never deducted any of those neither initial purchase nor improvement expenses, that were incurred over the years, that car was a fun hobby, and many friendships were made with other hobby enthusiasts. But now it is time to sell that car and it is time to make some money.
William and Sherry plan to travel much of next 2 years and that car is their ticket to travel and cover hotel expenses etc. But they will have a capital gain to claim when that antique car is sold.
William is very glad that He kept such good records over the years on what has gone into that car.
Their cost basis ended up being quite significant so when they pay the estimated taxes on their capital gain it will not be based upon the amount they sold the antique car, it will be the based upon the difference between their cost basis and the sale price. They will be making every penny back that they put into the antique car over all those years and, also quite a bit extra, so making the estimated tax payment will bring another smile to the faces.
And since they have the records to support their position, on the cost basis of the vehicle and the date of acquisition as well as the improvements made over the years, when the sale goes through, they know exactly where that sale document will be filed to have all the documents together. In the event those documents are needed again.
Additionally, they also know that all the documentation will also be on file with their tax return as well.
William and Sherry also are selling their 5-year-old vehicle, but with that separate transaction they are not going to be making a capital gain, nor are they going to have a capital loss. They are simply selling a well-used commuting vehicle that served the family well for 5 years. And no profit is being made with this separate transaction.
by Kristin P. Sinclair: A Accu Tax
Rock Hill, SC
June 19, 2022