Here's an excerpt from a Usenet posting (in misc.taxes.moderated) back in 1998 that I believe is still accurate:
> I just sold a vehicle and was wondering how this affectsThere was a follow-up query similar to yours, with a response from Ed Zollars:
> my tax situation. Is the sale price of the vehicle
> considered taxable income?
Its not income unless you are a dealer, in which case the
margin on the sale (exess of selling price over basis) is
taxable as income. If you are not a dealer, then it depends
on what you paid for it, whether you claimed any
depreciation on it and what you sold it for. If you took no
depreciation on the vehicle and sold it for less than you
paid for it (Plus or minus any adjustments to basis), then
there's no tax. If you took no depreciation on it and sold
it for more than you paid (Plus or minus any adjustments to
basis) then you have a capital gain in the amount you
recieved above what your basis is. It is short term gain,
taxable at your highest marginal income rate if you held it
for less than 12 months. If you held it more than 12 months
its long term capital gain. If you took depreciation on it
you will pay recapture rate on any amount realized over
basis, up to acquisition cost, and capital gains rate on any
amount recieved over purchase price.
> I'm curious: is there any justification for not being ableHope this helps,
> to claim a capital loss, to offset other gains, while still
> having to pay tax if there's a gain on the sale?
Officially, it's the law (Section 165(c) as I recall). Most
likely it comes primarily due to being very difficult to
implement a system that allowed losses on sale of personal
use items, since in most cases personal use property other
than real estate is going to be sold at a loss.
With the removal of most personal residence gains from
taxation, most personal use assets will not generate a tax
issue when sold.
Ed Zollars, CPA (AZ)
Phooley in Phoenix