IRS 1031 Exchange Question?

[Gary Kadrmas]

I am facing an important issue at the present time. Selling a car I have owned for over 30 years, and freaked out about having the Government take a part of my money. This is nothing new, the Government is always taking money from me, but this is a serious amount that I would rather see in my piggy bank, not the Governments.

My accountant has advised me selling a car for a sizable amount will put a person in the 5-22% capital gains bracket (In Oregon at least). We discussed if the IRS 1031 Exchange program would work to offset the pain, and his answer was yes. I have visited the IRS Web Site, and it appears the 1031 will work for me, but this part of the rule book is quite big, and I do not wish to misinterpret an area of the rule book where I get whacked a good one.

I would like to hear from other folks with some first hand experience of how the 1031 program works, start to finish.

Is their anyone out there that has direct experience with an IRS 1031 Exchange in an automotive environment? And if so, is there any 1031 Exchange 101 course available?

Thanks,

 

[Scott Calabro]

No experience with the IRS on this particular issue, but how will big brother know the details of how much the car sells for anyway ...... catch my drift ?

Scott

 

[Gary Kadrmas]

Scott,

The money will exchange hands one way or another. If it is a cashiers check/bank draft, anything deposited in an account over $10K gets reported to the IRS by the bank that deposited the $$$ into your account. If it is a bank wire transfer, I don't think so. I recently sold a cabin on Mt. Hood and had the $$$ done by wire. That was over a year ago, and I have never got anything in the mail from the IRS. But eventually, they will pick up on it one way or another. So in that case, I have my ducks in a row for that one.

The other way to go under the radar is cash. But that amount of cash gets people to ask questions, especially after 911. So cash is not an option. People get really interested in "whats in that bag?"

What I understand is this: With a 1031, an account is set up for the (wire) transfer of funds. The seller provides a list of like investments with amounts and location information to the account keeper. Once the wire hits the account, you have 45 days (for the keeper) to coordinate the transfers of the like investments. Doing your homework before this point really is paramount. Any amount not included in the 1031 is subject to capital gains. The lesser the amount left in the account, the less amount a person has to pay in capital gains.

If anything I have stated in this posting is not correct, or if anyone has anything to add, I would truly appreciate the feedback.

 

[Scott Calabro]

I guess you'll end up payin' :shrug:

 

[Pete McCluskey.]

The car must be a classic if its over 30 years old and will attract capital gains tax. Gary may I be so bold as to enquire what it is?

 

[Gary Kadrmas]

Pete,

My car is a 1964 AC Cobra. It is an Ex-Private Dragon Snake.

If you are interested, go to: COBRA IG DEUTSCHLAND and click on
"Anzeigenmarkt, and then on Fahrzeuge", and then look for CSX-2075.

Let me know what you think.

Thanks,

 

[Ian K]

Pete - I assume it is the CSX-2075 in his sig

Gary - nope, you have presented a very good summary of 1031 exchanges.
I've only dealt with it in terms of real estate (and my luck, I didn't have to
worry about it this go round). I am surprised your accountant cannot help
you out more, this should be right up his alley.

Ian

 

[Gary Kadrmas]

Ian,

My accountant helped us out on our taxes for our cabin we sold. While we were addressing the cabin deal, I got some general info about the auto 1031 exchange. Then I visited the IRS Web Site for reference information. Ugh! The info on the IRS Web Site is pretty complicated . But I was able to sift through it pretty well.

The accountant is well situated to help on the Cobra transaction. I did not get the accountant fully envolved right away, because I wanted to educate myself before I got further into the transaction. I like to do the research as much as I can before I have to pay anyone for information.

For me, parting with my Cobra after 30+ years is not scary stuff, but I do want to protect myself as well as I can. I do wish to get a GT40, and selling the Cobra is the only practical way in doing it, along with a few other toys and some other stuff for my shop I have been doing without for a while.epper:

Sure, I will probably kick myself in the butt for doing it, but if I made a list of all the cars I should have kept, I would need 3-4 more large shops to store them. Then, their would be more than one member with the signature that reads...."A few fries short of a Happy Meal"!!!!!

One keeper should have been a 1967 Trans-Am Cougar. Another story for another time. Ya know, I should start a new thread about the cars I have owned, and have everyone chime in with a list of their own. Hummmmmm!!!! Later.

 

[Pete McCluskey.]

Pete,

My car is a 1964 AC Cobra. It is an Ex-Private Dragon Snake.

If you are interested, go to: COBRA IG DEUTSCHLAND and click on
"Anzeigenmarkt, and then on Fahrzeuge", and then look for CSX-2075.

Let me know what you think.

Thanks,

Gary I think you have a gem with a great History.epper: If I could afford it I would snap it up.
Are you really sure you want to sell?

 

[Gary Kadrmas]

Pete,

For sure, the Cobra will be sold.....it is just a matter of timing. I have always wanted a GT40. I do not have the financial success to own a real deal, so I have decided on either a Superformance MkI, or an ERA GT.

I need to iron out the details of the 1031 thing, and start lining up like investments. Keep tuned. I will post my progress as this thing goes forward.

.....and again, anyone out there that has additional suggestions and information they would like to share, please do.