Cost Basis for Gifted Car

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daheld
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Location: Midwest US

Cost Basis for Gifted Car

Post by daheld »

Trying to plan ahead for how much tax liability we will have for 2021. Here's the story:

In 2004, my parents graciously bought a muscle car for me. They paid $8000. I enjoyed it through my college years and beyond. A few years ago they just signed over the title to me, and no money changed hands between my parents and I. As I got older, moved around the country for work, and finally settled a couple hours from home, the reality of storing and maintaining the car set in and I decided I should sell it. In January 2021, I posted it on FB marketplace, and it sold literally in about 30 minutes. The buyer wired me the money, arranged for transport, received the car and everything went fine. I received $20,000 for the car.

My question is: what would my cost basis be for the purposes of paying the long-term capital gains taxes when I file our taxes in early 2022? Is it $0 because that's how much I paid for it? Or can I somehow assume their cost basis since it was a gift?

To clarify, I am in no way trying to escape paying however much I rightfully owe, I just want to make sure I pay the correct amount and don't have to redo anything.
J295
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Re: Cost Basis for Gifted Car

Post by J295 »

Carryover basis plus your costs of any improvements.
Topic Author
daheld
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Location: Midwest US

Re: Cost Basis for Gifted Car

Post by daheld »

J295 wrote: Thu Sep 16, 2021 1:56 pm Carryover basis plus your costs of any improvements.
No real improvements were done. I did spend $600 on new tires just before I listed it for sale, but otherwise maybe spent $200 on the car in the 15 years before that.

Please ELI5 carryover basis. :beer
J295
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Re: Cost Basis for Gifted Car

Post by J295 »

daheld wrote: Thu Sep 16, 2021 1:59 pm
J295 wrote: Thu Sep 16, 2021 1:56 pm Carryover basis plus your costs of any improvements.
No real improvements were done. I did spend $600 on new tires just before I listed it for sale, but otherwise maybe spent $200 on the car in the 15 years before that.

Please ELI5 carryover basis. :beer

https://www.irs.gov/faqs/capital-gains- ... f-home-etc
Topic Author
daheld
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Location: Midwest US

Re: Cost Basis for Gifted Car

Post by daheld »

J295 wrote: Thu Sep 16, 2021 2:05 pm
daheld wrote: Thu Sep 16, 2021 1:59 pm
J295 wrote: Thu Sep 16, 2021 1:56 pm Carryover basis plus your costs of any improvements.
No real improvements were done. I did spend $600 on new tires just before I listed it for sale, but otherwise maybe spent $200 on the car in the 15 years before that.

Please ELI5 carryover basis. :beer

https://www.irs.gov/faqs/capital-gains- ... f-home-etc
Thanks. They paid $8000 when purchased. No improvements were made. The FMV just before they gifted it to me was certainly more than $8000. So my cost basis for tax reporting purposes would be $8000, correct? I just want to make sure I understand fully.
Katietsu
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Re: Cost Basis for Gifted Car

Post by Katietsu »

daheld wrote: Thu Sep 16, 2021 2:11 pm
J295 wrote: Thu Sep 16, 2021 2:05 pm
daheld wrote: Thu Sep 16, 2021 1:59 pm
J295 wrote: Thu Sep 16, 2021 1:56 pm Carryover basis plus your costs of any improvements.
No real improvements were done. I did spend $600 on new tires just before I listed it for sale, but otherwise maybe spent $200 on the car in the 15 years before that.

Please ELI5 carryover basis. :beer

https://www.irs.gov/faqs/capital-gains- ... f-home-etc
Thanks. They paid $8000 when purchased. No improvements were made. The FMV just before they gifted it to me was certainly more than $8000. So my cost basis for tax reporting purposes would be $8000, correct? I just want to make sure I understand fully.
Yes.
Gill
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Re: Cost Basis for Gifted Car

Post by Gill »

Your basis is $8,000 and you are much more honest than probably 99% of the population.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
RudyS
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Re: Cost Basis for Gifted Car

Post by RudyS »

Gill wrote: Thu Sep 16, 2021 2:22 pm Your basis is $8,000 and you are much more honest than probably 99% of the population.
Gill
Yes, but sometimes honesty is enforced. Facebook, and Paypal, report "certain" payments to the IRS. There is a minimum, but I don't know what it is.
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Watty
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Re: Cost Basis for Gifted Car

Post by Watty »

daheld wrote: Thu Sep 16, 2021 1:54 pm As I got older, moved around the country for work, and finally settled a couple hours from home, the reality of storing and maintaining the car set in and I decided I should sell it.
It would be worth looking into if the storage costs would add to the cost basis especially if you did something like left it in a storage unit when you were in other parts of the country.
Topic Author
daheld
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Re: Cost Basis for Gifted Car

Post by daheld »

Watty wrote: Thu Sep 16, 2021 11:14 pm
daheld wrote: Thu Sep 16, 2021 1:54 pm As I got older, moved around the country for work, and finally settled a couple hours from home, the reality of storing and maintaining the car set in and I decided I should sell it.
It would be worth looking into if the storage costs would add to the cost basis especially if you did something like left it in a storage unit when you were in other parts of the country.
Thanks for this. But I did not. It stayed at my parents garage the entire time. I will do some research and I’ll include every single penny I legally can in my cost basis, but as I said I’m not looking to flout the law.
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Rainier
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Re: Cost Basis for Gifted Car

Post by Rainier »

Your cost basis is the FMV on date of transfer, not $8,000.

If all you did was store this car as an investment (rarely driven) then all your costs go to the basis. Annual insurance, registration, state taxes, heating for garage, etc....

I seriously doubt you have a gain to report.

I believe you get a 1099k when you make over $25k.
Gill
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Re: Cost Basis for Gifted Car

Post by Gill »

Rainier wrote: Fri Sep 17, 2021 6:42 pm Your cost basis is the FMV on date of transfer, not $8,000.

If all you did was store this car as an investment (rarely driven) then all your costs go to the basis. Annual insurance, registration, state taxes, heating for garage, etc....

I seriously doubt you have a gain to report.

I believe you get a 1099k when you make over $25k.
I beg your pardon but what is your basis for saying FMV on the date of transfer is his basis although that may be moot in this set of facts because it appears the payment and the transfer was simultaneous. Also, was not investment property but personal use property although that is irrelevant to the issue at hand. Finally, a 1099k doesn’t apply here. Where are you getting your information?
Gill
Last edited by Gill on Fri Sep 17, 2021 7:30 pm, edited 1 time in total.
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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Rainier
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Re: Cost Basis for Gifted Car

Post by Rainier »

Gill wrote: Fri Sep 17, 2021 7:08 pm
Rainier wrote: Fri Sep 17, 2021 6:42 pm Your cost basis is the FMV on date of transfer, not $8,000.

If all you did was store this car as an investment (rarely driven) then all your costs go to the basis. Annual insurance, registration, state taxes, heating for garage, etc....

I seriously doubt you have a gain to report.

I believe you get a 1099k when you make over $25k.
I beg your pardon but what is your basis for saying FMV on the date of transfer is his basis? Also, was not investment property but personal use property although that is irrelevant to the issue at hand. Finally, a 1099k doesn’t apply here. Where are you getting your information?
Gill
Correct, was thinking stepped up basis for some reason, but agree with the $8k now.

On personal use property. OP mentioned just storing it and not using it.

On 1099K OP mentioned reporting by Facebook and PayPal. Thinking maybe he got paid by credit card through one of those vendors.
Topic Author
daheld
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Location: Midwest US

Re: Cost Basis for Gifted Car

Post by daheld »

Rainier wrote: Fri Sep 17, 2021 7:29 pm
Gill wrote: Fri Sep 17, 2021 7:08 pm
Rainier wrote: Fri Sep 17, 2021 6:42 pm Your cost basis is the FMV on date of transfer, not $8,000.

If all you did was store this car as an investment (rarely driven) then all your costs go to the basis. Annual insurance, registration, state taxes, heating for garage, etc....

I seriously doubt you have a gain to report.

I believe you get a 1099k when you make over $25k.
I beg your pardon but what is your basis for saying FMV on the date of transfer is his basis? Also, was not investment property but personal use property although that is irrelevant to the issue at hand. Finally, a 1099k doesn’t apply here. Where are you getting your information?
Gill
Correct, was thinking stepped up basis for some reason, but agree with the $8k now.

On personal use property. OP mentioned just storing it and not using it.

On 1099K OP mentioned reporting by Facebook and PayPal. Thinking maybe he got paid by credit card through one of those vendors.
It was a wire transfer. Not PayPal. The sale price was not recorded on Facebook. It was listed on FB, then once the wire transfer went through I simply removed the listing.
Gill
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Location: Florida

Re: Cost Basis for Gifted Car

Post by Gill »

daheld wrote: Sat Sep 18, 2021 3:31 pm
Rainier wrote: Fri Sep 17, 2021 7:29 pm
Gill wrote: Fri Sep 17, 2021 7:08 pm
Rainier wrote: Fri Sep 17, 2021 6:42 pm Your cost basis is the FMV on date of transfer, not $8,000.

If all you did was store this car as an investment (rarely driven) then all your costs go to the basis. Annual insurance, registration, state taxes, heating for garage, etc....

I seriously doubt you have a gain to report.

I believe you get a 1099k when you make over $25k.
I beg your pardon but what is your basis for saying FMV on the date of transfer is his basis? Also, was not investment property but personal use property although that is irrelevant to the issue at hand. Finally, a 1099k doesn’t apply here. Where are you getting your information?
Gill
Correct, was thinking stepped up basis for some reason, but agree with the $8k now.

On personal use property. OP mentioned just storing it and not using it.

On 1099K OP mentioned reporting by Facebook and PayPal. Thinking maybe he got paid by credit card through one of those vendors.
It was a wire transfer. Not PayPal. The sale price was not recorded on Facebook. It was listed on FB, then once the wire transfer went through I simply removed the listing.
The existence or lack of a 1099 has no bearing on the reporting requirement, of course, but I still say you’re a rare bird reporting the sale of a used car. I’m not saying there isn’t an obligation to report such a transaction. Just saying, few do.
Gill
Cost basis is redundant. One has a basis in an investment | One advises and gives advice | One should follow the principle of investing one's principal
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