Paying income taxes on classic car sales (U.S)

[jmackro]

My accountant said, "Take the deduction, let them challenge you."

Your accountant is right, though a lot depends on how you sell the car.

If it's a private party transaction, the buyer's state DMV is going to ask the price of the car so they can tax it accordingly. But whether he reports it accurately is an unknown to you. Further, unless you live in the same state, your own state taxing authority (as well as the IRS) are unlikely to know of the transaction, let along the selling price.

If you sell through a dealer or auction house, they are going to issue 1099's to your state and the IRS. In this case, keeping mum is a little more risky. Might get away with it in a small state and with a low-dollar sale. Sell a Ferrari through RM Auctions here in California and try staying mum could lead to problems.

 

[Arde]

Your accountant is right, though a lot depends on how you sell the car.

If it's a private party transaction, the buyer's state DMV is going to ask the price of the car so they can tax it accordingly. But whether he reports it accurately is an unknown to you. Further, unless you live in the same state, your own state taxing authority (as well as the IRS) are unlikely to know of the transaction, let along the selling price.

If you sell through a dealer or auction house, they are going to issue 1099's to your state and the IRS. In this case, keeping mum is a little more risky. Might get away with it in a small state and with a low-dollar sale. Sell a Ferrari through RM Auctions here in California and try staying mum could lead to problems.

Very useful perspective.
If I had a Ferrari I would keep it then .