Investing In Classic Cars

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Classic Cars and Capital Gains Tax

Antique or collectible items such as classic cars can be highly lucrative investments – as a matter of fact, collectible classic cars have greatly increased in value in recent years, and demand is for them is currently at a high.

In the USA capital gains tax rates for the sale of collectible property items are much higher than those on the sale of real estate, however there is a way for United States investors to avoid paying inflated capital gains rates on the sale of a classic car. There is a tactic that is often used by real estate investors, and it can also be particularly helpful when utilised in the sale of your collectible property items. The answer is to make a 1031 exchange.

By making an exchange on your personal property instead of selling outright, you can avoid a huge hit to your returns and maximize your potential profits. United States investors can save big money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of collectable and investment property. A 1031 tax exchange is almost like getting an interest free loan from Uncle Sam!

By making a 1031 exchange instead of selling outright, you can defer your capital gains taxes indefinitely, allowing that 28% to be reinvested and continue working for you. This is useful for real estate investors, but even more so for those holding personal property for investment. However there are a few things that you should keep in mind when making 1031 exchanges on personal property items, such as a classic car, and other types of collectibles including antiques.

If you identify your replacement properties within the 45-day deadline, you can even put your proceeds towards the purchase of more than one replacement property. In addition, keep in mind that both the collector car that you are exchanging, and the replacement, must be held for business or investment purposes.

In light of the enormous capital gains tax hit that accompanies the sale of classic cars and other such collectibles, those who have put money into these kinds of investments have a unique opportunity to profit from making an exchange instead of selling up front, and will benefit even more from the tax deferral than those with real estate investments.

classic cars for sale


classic cars for sale

- Quote from USA IRS -

“Like-Kind Exchanges – Real Estate Tax Tips

Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.

Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.

Like-Kind Property

Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.

Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.”

classic cars for sale


classic cars for sale
classic cars for sale

For further information see:-
http://www.irs.gov/businesses/small/industries/article/0,,id=98491,00.html

Classic Investment

classic cars for sale


classic cars for sale
collector cars for sale
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Investing In Classic Cars July 17th 2009