Capital gains ???

Eldon (WA)

Well-known Member
So if I sold my car for $5,000 less than I paid for it and sold a tractor for $5,000 more than I paid for it, would I owe any capital gains tax?? (non-business).
 
Are you going to tell anybody about it?? <grin>!

Seems to me that if you sold the tractor for more than you paid, you made a profit, not necessarily a capital gain. BUT, I would bet that if you put your mind to it, you can add up some expenses involved with getting more than you paid for it. Like the cost of hauling it, time invested in cleaning it up, and any parts involved in getting it to run right or just to run at all.
 
If you chose to report the two transactions on form 8949 and both were non-business, never
depreciated personal property then the two transactions together would constitute a ''wash'', no
net tax. If you depreciated the tractor or the vehickle then you would be required to calculate
depreciation recapture which would could in an increase in your tax liabilitie in the year sold.
 
(quoted from post at 19:48:31 04/25/17) So if I sold my car for $5,000 less than I paid for it and sold a tractor for $5,000 more than I paid for it, would I owe any capital gains tax?? (non-business).

The very short answer is yes, you would. As an asset, or personal property which is a 'major' purchase, the expected value of the asset/property is that it will decline on some scheduled rate from its basis. 'Losing' money on a car over time and use is the expected condition, and there is no offset when you sell a car for profit(presuming it was a profit, and not restoration, or repairs that you can show $5000 in materials and labor were expended to sell it).

The longer answer is 'it depends'. Since you stated this is a non-business, you could consider it hobby income, and it would be taxable, based on the deductions from other losses directly related to your hobby. In most cases, you are not eligible for hobby losses. Same with gambling, you don't get to deduct your losses, but you DO have to declare and pay tax on your winnings, even if it is not your business.

Generally speaking, income from whatever source is taxable, except the specific tax free investments(muni bonds, etc). Losses have to go on a schedule from a business where we get into Sched A(business itemization), D(where you report the sale of your car for profit), E (rental income/loss). Few people report the income from stuff like this. And, unless you get a 1099-MISC, no one will ever know.
 
"time invested in cleaning it up" is not a deductible expense if it's your own time. Income gained from your own time and labor is taxable.
 
What I heard and really doesn't sound fair is if you have a yard sale the proceeds are suppose to be taxable. What!!? You paid a lot more for the stuff to begin with and didn't depreciate it. How is this a "profit"?
 
(quoted from post at 04:07:01 04/26/17) What I heard and really doesn't sound fair is if you have a yard sale the proceeds are suppose to be taxable. What!!? You paid a lot more for the stuff to begin with and didn't depreciate it. How is this a "profit"?

It's not about profit, it's about INCOME.

The government taxes your income, not your profit.
 
Not sure about capital gains, but I once bought an 856 Farmall when prices were low, used it and depreciated it for 9 years, and then sold it for about the same price I'd paid for it.

The IRS wanted all of that depreciation back. It's called "recapture". I would pretty much have had a free tractor if I'd just kept it.
 
If you work a job your income is taxed less deductions but with farming or a business the profit is taxed,You could have $100,000 income $98,000 expenses and you'll pay taxes on
$2,000 not $100,000.Of course its never that simple but you only end up paying on total profit after the accountant does his thing.
 
That's why if you depreciate a piece of equipment you need to trade it in on another piece as you don't pay tax on the trade in value.Or keep it and use it for as you pointed out basically free parts.
 
I argued that with my tax man. I asked why depreciate my tractors when all will be sold for more than I paid for them. He replied with the IRS says you must depreciate them if you use them in your business.
 
I would guess that your tax man wants to charge to fill out forms because the IRS does not require anyone to depreciate anything if they dont choose to do so and there are specific schedules for reporting cost basis and sale price for any endeavor. If you are buying and selling tractors as a business the purchase price should be reported on line 4 of the schedule ''C'' and the selling price on line 1 of the schedule ''C'' and all related expenses reported in part II of the schedule ''C''. You report the profit or loss on line 12 of your 1040, then you will be taxed on the profit or you can deduct the loss.
 

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