Car Sale/Taxable Income Question.

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I'm getting ready to sell my '90 and need an answer if anyone can provide one. Is there a way to sell a car privately in PA and put the money in some sort of account so that it will not be considered income this year?
Maybe a deferred payment/account of some kind for tax deferrment until next year? TIA
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selling a car shouldn't be considered 'income' anyway, since you most likely will be selling it at a 'loss' from its original price. But having lived in Pa for a few years I know Pa "tax laws" are a bit unusual from the rest of the country.

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I agree on both counts.
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truebluebowtie wrote:

When you ask the tax person, ask, "What happens if it's sold out of state?"
-- PJ
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Talk to a tax accountant, they know the rules.
truebluebowtie wrote:

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Obviously the best route but thought someone might have some insight here.
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wrote:

I don't know PA law, but I am hoping there is enough sense in it to recognize that the State can't tax the buyer and the seller both on the same exchange of money/property. When the buyer transfers the ownership, he will pay taxes on the amount he reports as the purchase price. I don't believe you will also be taxed or even need to report that same amount and subject it to a second taxing.
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Don't try that with the '67 435 hp coupe you bought for $40,000 7 years ago and sold just recently for $150,000.
I think you will find several get their hands in on your gain.
wrote:

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I don't understand why a state would be entitled to any money made on a car. If there is a law saying if you make money on a car, the other edge of that law would give you a deduction for any money lost when selling a car (?) How many people actually make money when they trade in ? I think this is a loosing proposition for the state if it is in fact true. Now if your business is buying and selling autos the that is different. Also any hobby, if not used as a deduction would not qualify as income (federally speaking). IMHO FWIW I really would like to hear more about this supposed PA law, if anyone really knows the truth
kickstart
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On Sun, 24 Sep 2006 13:27:16 GMT, "Kickstart"

Capital Gains. -- lab~rat >:-) Do you want polite or do you want sincere?
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BDragon wrote:

In many states the buyer pays the "sales or use tax" on the purchase cost of the vehicle. That is frequently the amount due after trade-in allowance. In states that have personal income taxes, the "Seller" pays taxes on the "profit or net gain" of the sale (he originally bought it for 15,000, sells it for 20,000, pays income tax on 5,000) Two different taxing mechanisms. One considered a "user fee" and the other is an "income tax".
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Governments do it all the time. You buy an item at the store, pay a sales tax, and the business pays a profit tax. Not to mention the 50 times before it made it to the retail store that the item was taxed.
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Well not quite - the profit each entity realized on the item is taxed, not the total value of the item each time it changes hands.
Here's waving to ya - \||||
Owen ___
'67BB & '72BB
-- not affiliated with JLA forum in any way -- alt.autos.corvette is original posting -- ___
"To know the world intimately is the beginning of caring." -- Ann Hayman Zwinger
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BDragon, wrote the following at or about 9/23/2006 9:36 PM:

There's enough sense there that they will get whatever taxes they can.
Probably only going to be ONE tax collected on the direct transaction but... Think about it a minute. I have a '90 that I "stole" for a mere $2,000 because the previous owner spilled a cup of coffee on the console and the tires were dirty<g>
You come along and want to by this pristine '90 with the coffee cleaned up and a new set of skips on it (actually, I just washed the tires and put some dressing on them)and pay me $13,000 for this car.
Now, depending on how they assess the tax, the buyer (you) will be liable for tax on the $13,000 purchase price. This likely will be categorized as a sales tax.
For my part, even though I am not a dealer, I have realized a profit or income of $11,000 (less the cost of cleaning up the car and tires for sale). If PA has an income tax and I'm honest, they will get their bite of my $11,000 profit as will the feds.
This is probably the exception since most itinerant sales of cars result in a "loss."
Remember... the subject line has to do with taxable income, not sales tax.
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Unquestionably Confused wrote:

Brings up another question.
In California, a private party records the selling price on a "report of sale" that's sent to the DMV within 10 days. This report gets the seller off the hook for traffic tickets and financial responsibility. The selling price is checked against the purchase price the buyer reports to assess the sales tax on the transaction.
What isn't mentioned is whether there is a "sales price history" for every used car in the state. Anyone know if that data is kept and how it's used? (i.e. is it reported to the Franchise Tax Board -- the state income tax folk?)
-- PJ '89 Hookercar '02 e-blu coupe
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I appreciate all the comments and perhaps clouded the issue by mentioning my state. I really don't think there is anything PA will need from me, I'm more concerned and interested in the IRS and my tax statement for this year. Will the selling amount be considered income that should be reported on income tax for 2006?
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truebluebowtie wrote:

Federal is easy. It's not income unless you are in the business of buying and selling cars and held the 'vette as business inventory (like on a schedule C). Or, you are a collector and the car appreciated in value. Or, you used the car in a business and wrote off depreciation on prior tax returns. Or, you rented the car out etc....
--
--
PJ

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mentioning
I think this is correct. If you have been depreciating the vehicle, then you might have to claim capital gains on the sale. Or if you have sold enough vehicles to qualify as a dealer, or if you charged it off as a business expense. Other than that, I wouldn't claim it all.
Also, the fact that was mentioned above about a possible gain having to be balanced by a more likely capital loss every time a car is sold is probably the only reason the IRS hasn't been taxing this somehow. The number of cars that actually return a profit has got to be miniscule compared to the 98 percent that constitute a loss.
If it hasn't been on a depreciation schedule, I can't imagine the IRS would be involved in any fashion with this.
It's like you selling your grandfather's pocket watch. It cost him $2 and you sold it for $200, but I don't believe the IRS becomes involved in that transaction in any way.
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And the state will get it's due when the new owner registers the title (at least that's how it's done in Ohio).
Tip
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Right. In PA, there is a sales tax form that must accompany all car sales making it impossible for the buyer to escape paying. Not a bad deal for the state in that every time the car is sold, sales tax is collected. This could be a one time deal or a dozen, each time, more sales tax. It's possible that the car's value could be overshadowed by the amount of sales tax it generated over time. Not a bad deal for them.
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