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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
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Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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is an antique car considered a collectible for capital ...

Customer Question

is an antique car considered a collectible for capital gains purposes?
Submitted: 7 years ago.
Category: Tax
Expert:  Matt Kesler replied 7 years ago.
Section 118-5 of the Income Tax Assessment Act states that you disregard a capital gain or capital loss you make on a car, motor cycle or similar vehicle. A car is defined to be 'a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers' (subsection 995-1(1)).

A car is a CGT asset under Division 108. A car may be a collectible in terms of subsection 108-10(2) if it is an antique. A car may be a personal use asset in terms of subsection 108-20(2) if it is used or kept mainly for your (or your associate's) personal use or enjoyment. In either case, it remains a car for the purposes of section 118-5 and any capital gain or capital loss made on it is disregarded under that section.

A capital gain or capital loss you make on an antique, veteran or vintage motor vehicle designed to carry a load of 1 tonne or more and 9 or more passengers is not disregarded so it would qualify for capital gains at the collectible rate.

Basically, a car is considered a car even when it is an antique so it would be disregarded from capital gains calculations because cars are disregarded from capital gains calculations.
Customer: replied 7 years ago.
Matt I can not find your reference in the code. sec 108 appears to be income from discharge of indebtedness. Please be more specific
Expert:  Matt Kesler replied 7 years ago.
I apologize, that was a mistaken post. I've been working on some Australian tax issues this morning and I looked up the code in the wrong book. That is an Australian tax law and obviously it would not apply to you.

In the US your car would be considered an ordinary capital asset even though it is a collectible. This is true because IRS Form 544 includes "A car used for pleasure or commuting." as an ordinary capital asset and this would be a vehicle used for pleasure regardless of whether it is regularly driven.
Here is a link to form 544 with information on the sale and disposition of assets. Page 19 section 2 under Capital Assets includes this vehicle.

Sorry about that initial mix-up. Obviously you are in Oklahoma, not Australia.
http://www.irs.gov/pub/irs-pdf/p544.pdf
Customer: replied 7 years ago.
Matt, great so back to the original question? Is an antique car normal capital gains or collectible gains?
Expert:  Matt Kesler replied 7 years ago.
It will be normal capital gains. That's why it's listed on the 544 as an ordinary capital asset.
Customer: replied 7 years ago.
MATT YOU HAVE TO BACK THAT UP WITH A SOURCE. I WILL GIVE YOU TWO OPTIONS. GIVE ME WHAT I ASK FOR WITH SOURCE(IRS PUBLICATION IS NOT SOURCE) OR ADMIT YOU DONT KNOW AND STOP WAISTING OUR TIME. IF YOU FAIL TO COMPLY I WILL GIVE YOU A NEGATIVE REVIEW
Expert:  Matt Kesler replied 7 years ago.
I'm not sure what better a source I could give you than an IRS publication for an IRS issue.

I'll opt out of the question and open it up to other experts since you are dissatisfied with the answer.
Customer: replied 7 years ago.
Matt, thank you for being honest. However, if you believe that an IRS publication is the source of law, then I have to question your credentials. I do not see how you could have an accounting degree and not be able to research tax law. just my 2 cents.
Expert:  Wendy Reed replied 7 years ago.

HelloCustomer

Collectibles are defined (in this section in regard to retirement plans, but this section is referred to when discussing the 28% capital gain in the tax code also) in IRC Sec. 408(m)(2).

Here is a reference, look at page 14: http://www.irs.gov/pub/irs-tege/irc408.pdf

Obviously, this is a very short and non-inclusive list, however, I would advise my clients that most if not all antiques, including cars are considered collectibles for the purpose of the 28% max. capital gain tax. My reasoning is that any tangible item that has the potential to be sought after by a collector(s) would be considered a "collectible" item. Whether or not the car is used for pleasure or actually driven does not take away from the fact that it is still deemed a collectible.

Customer: replied 7 years ago.
Wendy: Thank your for the attempt. However, I am actually looking for any TDs or case law for precedent.
Customer: replied 7 years ago.
Wendy, what about a 2007 chevy pickup? Would it be a collectible also? Based upon your answer it would be.

"My reasoning is that any tangible item that has the potential to be sought after by a collector(s) would be considered a "collectible" item. Whether or not the car is used for pleasure or actually driven does not take away from the fact that it is still deemed a collectible."
Expert:  Wendy Reed replied 7 years ago.

DearCustomer

Yes, I suppose that taXXXXX XXXXXterally, any asset could be a collectible if owned by someome who collects things. However, when I use the term "collector", I am referring to a person who deals in items such as antiques, and the term antique is the key word here.

The online access to Tax court decisions is down right now, and I can find no other case law on this particular situation. The words "any antique" in the Section of the code I referred you to is definitive and straightforward. You stated that the car is an antique, and as such, it fits the definition of IRC as a collectible.

I will also refer this question to the other tax experts for additional opinions/insights/feedback.

Expert:  MequonCPA replied 7 years ago.

DearCustomer-

Try this link.

http://www.bankrate.com/brm/news/investing/20040202a1.asp

Hope this helps.

Steve

If you are satisfied with my work, kindly press the green "ACCEPT". It is the only way I am paid for assisting you. Positive feedback and bonuses are appreciated.

Customer: replied 7 years ago.
Reply to Steve's Post: Steve: Thank you but the article is anecdotal at best. Is there a definition of antique cars in the code?
Expert:  Ed Johnson replied 7 years ago.

DearCustomer

Secion 408(m) of the Internal Revenue Code provides the following definitoin of a collectable. Admittedly it pertains to a particular section on what constitutes an investment for investment accounts. However, the definitions used by the IRS hold ture throughout.

From the IRS Code section on capital gains and losses, for collectable, for defination, the code refers to secion 408(m)

5) Collectibles gain and loss For purposes of this subsection- (A) In general The terms "collectibles gain" and "collectibles loss" mean gain or loss (respectively) from the sale or exchange of a collectible (as defined in section 408 (m) without regard to paragraph (3) thereof) which is a capital asset held for more than 1 year but only to the extent such gain is taken into account in computing gross income and such loss is taken into account in computing taxable income.

REFERENCE: http://www4.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00000001----000-.html

 

(2) Collectible defined
For purposes of this subsection, the term "collectible" means -

(A) any work of art,
(B) any rug or antique,
(C) any metal or gem,
(D) any stamp or coin,
(E) any alcoholic beverage, or
(F) any other tangible personal property specified by the
Secretary for purposes of this subsection.
(3) Exception for certain coins and bullion
For purposes of this subsection, the term "collectible" shall
not include -
(A) any coin which is -
(i) a gold coin described in paragraph (7), (8), (9), or
(10) of section 5112(a) of title 31, United States Code,
(ii) a silver coin described in section 5112(e) of title
31, United States Code,
(iii) a platinum coin described in section 5112(k) of title
31, United States Code, or
(iv) a coin issued under the laws of any State, or

(B) any gold, silver, platinum, or palladium bullion of a
fineness equal to or exceeding the minimum fineness that a
contract market (as described in section 7 of the Commodity
Exchange Act, 7 U.S.C. 7) (!3) requires for metals which may be
delivered in satisfaction of a regulated futures contract

REFERENCE: Section 408 (m)

 

Customer: replied 7 years ago.
Reply to Ed Johnson's Post: Ed thankyou. I am familiar with that. I am not sure what would constitue whether a car would be considered antique. The only case law I can find revolves around 1940 era cars. How do you know when a car would be considered antique? What is the criteria that determines if a car is antique.
Expert:  Ed Johnson replied 7 years ago.

DearCustomer

The antique would be determined in the state in which it is registered. It may vary by state. However, most states have a 50 year limit while some others have 30 year for antique and 20 year for classic.

The antique license operation limitations approximate, very closely, the limitation described in the IRS Publications about what constitutes a collectible.

If the car is eligible for antiques plates in your state, and it is registered as such, then it is an antique.

Customer: replied 7 years ago.
Ed what are antique plates? Is it something one has to have for compliance purposes or is it a personal preference?    The car in question is a 1967 model? Would it be considered an antique in Oklahoma?
Expert:  Ed Johnson replied 7 years ago.

DearCustomer

A previous expert had commented on use as part of the conition of being a collectable, anticque or an auto not generaly subject to capital gains tax.

In every state, the DMV's allow auto owners to register your cars with special registratioins related to use and age. In nearly every state you can register a car as an anticque which is a limited use auto registration. However, state to state, it varies and some allow a condiin called classic, which is a 20 year car and considererd a collectable if you are using it in car shows, etc.

For Oklahoma cars that are at least 25 years old qualify as a classic or anticque auto.

REFERENCE: http://www.tax.ok.gov/plates/sp023.html

 

 

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