Capital gains on personal aircraft sale

NordicDave said:
It was my understanding that any asset eligible for capital gains taxes has its basis adjusted upward for the repairs, maintenance, and improvements made to that asset. A house is a good example. New kitchen, bathrooms, reroof, the cost of an addition all changed the cost basis for the tax liability calculation.

Normal operating expenses like insurance, oil, fuel, oxygen tank refills, annual inspections, etc are expenses that can only be deducted from income if part of a business.
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Improvements yes. Maintenance no.

As I said before ask a CPA. Advice here is worth what you pay for it.
 
This topic leads to many questions regarding vehicles. Would capital gains also apply to cars, motorcycles and boats also? In today’s market I could sell a used car for more than I paid for it new.
 
Mikey B said:
The threshold to go from 15 to 20% is about $500,000. Most of us don't need to worry about getting there ...
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I was mostly referring to the lower threshold which is ~40,000 for singles and ~80,000
NordicDave said:
It was my understanding that any asset eligible for capital gains taxes has its basis adjusted upward for the repairs, maintenance, and improvements made to that asset. A house is a good example. New kitchen, bathrooms, reroof, the cost of an addition all changed the cost basis for the tax liability calculation.

Normal operating expenses like insurance, oil, fuel, oxygen tank refills, annual inspections, etc are expenses that can only be deducted from income if part of a business.
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Again, repairs and maintenance that just keep it the way it is don't qualify for increasing the basis. Those can be expensed for business. In order to be a capital improvement, you have to make it better or extend its life (more than a year).
 
Meh....top OH is no different than a new roof or siding or windows I put on my rentals. They increase the basis of the property but are also depreciated.
 
You can only depreciate capital improvements. While the improvement increases the basis, you have to recapture that depreciation when you dispose of the property. Depreciation recapture is 25% on real estate. You come out maybe 3% head (assuming you're in a 28% tax bracket).
 
RonP said:
This topic leads to many questions regarding vehicles. Would capital gains also apply to cars, motorcycles and boats also? In today’s market I could sell a used car for more than I paid for it new.
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Yes
 
RonP said:
This topic leads to many questions regarding vehicles. Would capital gains also apply to cars, motorcycles and boats also? In today’s market I could sell a used car for more than I paid for it new.
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And houses (there’s a capital gains exclusion), art, TVs, collectibles, everything…
 
RonP said:
This topic leads to many questions regarding vehicles. Would capital gains also apply to cars, motorcycles and boats also? In today’s market I could sell a used car for more than I paid for it new.
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Of course. ANYTHING you sell for more than you paid is a capital gain; either short term or long term. Residences have a partial exemption since politicians are afraid of angering too many home owners but its still a capital gain.
 
Rejuvenate this thread as “The taxman cometh.”

Capital Gains status on:

Buying an Un-Airworthy ( out of Annual) aircraft and subsequent resale as

Airworthy? Improvement or Maintenance?

Buying with a 42 year old Lien and clearing same?

Buying needing fabric and selling after new fabric? Improvement? Maintenance?

My guess is most CPAs are not familiar with some of this.
 
Airworthy doesn't really enter into it as far as the IRS is concerned. The issue is what you paid for the plane, that's where basis start.
Capital improvements are added to the basis, maintenance is not. The IRS has rules for characterizing the difference. But there are two principles that work in your favor on such a renovation. Both "rebuilding property after the end of its economic useful life" and "replacing a major component or structural part of the property" are considered capital improvements and not maintenance.

Money paid to the lien holder to release the lien clearly is added to the basis (it's more "purchase price).
 
When I had a sail boat, it was a secondary residence. There were several "tests" to check if it qualified. One was that it had to be a "documented" yacht.
 
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