Casual Sale of Airplane - Taxes

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kyleb

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I was talking with a friend this evening who recently sold his 182. He'd put some money into the panel, but probably doubled his money over the 5 or so years he owned the airplane.

He was concerned about his tax liability on the sale and how much income tax he would have to pay on the substantial profit he pocketed.

My thoughts are that nobody is tracking transactions between private individuals, so how's he gonna get dinged for taxes? Then I started wondering what circumstances might drive an income tax payment obligation on the casual sale of an airplane. Is there any obligation?

Anyone....Bueller....
 
Technically it would be a capital gain. Whether anyone reports it or not depends on their tax prowess and their honesty.
 
This is one reason they’re trying to get the IRS to monitor monetary accounts.

the sale is a capital gain and you owe tax on it. Today, you can get it into a bank and nobody is watching. In the future, the IRS will see it and want you to account for where the money came from.
 
He'd want to very carefully determine his basis in the asset, which would likely include things like capital improvements and maybe even certain other maintenance and upgrades. With an airplane, it's quite likely he might be able to have an adjusted basis that isn't far from the sale price. But he should consult with an experienced tax lawyer before trying to figure out how much in taxes is owed.
 
I don’t believe the sale of a non financial asset is a federal taxable event except for real estate and “valuables” like art or jewelry. You certainly can’t deduct the loss.
 
He already paid taxes on the materials used to upgrade the aircraft.
 
Hang 4 said:
I don’t believe the sale of a non financial asset is a federal taxable event except for real estate and “valuables” like art or jewelry. You certainly can’t deduct the loss.
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You would be incorrect.
 
The cost of the panel would be losses and offset the gain at least partially. What about maintenance costs to keep it airworthy? I’d expect that to offset as well.
 
You even owe taxes on ill gotten gains, but you can't deduct your capital costs :confused:
https://en.wikipedia.org/wiki/Taxation_of_illegal_income_in_the_United_States

If you make money on ANYTHING....you owe the man. Lemonade stand, kilo of meth, paid to stand in line for the latest iphone, traded any item for one that is higher value, ect.

Long term or short term capital gains is usually the question, and his tax exposure is usually commensurate with his income level.

My only gripe with the situation (not true, I have many gripes), is that if he were to take a loss on it, he can't deduct it.
 
The government wants a part of your income, no matter where it comes from.
My business buys a truck, I fully depreciate it after 5 years, when I sell it, the proceeds are INCOME and taxed like any other source of income. Buy a house, maintain it, improve it and then sell it. You are supposed to pay taxes on the gain, but your cost basis includes all the maintenance and improvements. I would think an airplane, or any other item would be the same.
 
Hang 4 said:
I don’t believe the sale of a non financial asset is a federal taxable event except for real estate and “valuables” like art or jewelry. You certainly can’t deduct the loss.
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NealRomeoGolf said:
You would be incorrect.
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I stand corrected. I am half right, the losses are not deductible, gains are. I'm dealing with that now on some inherited stuff that is worth a lot less now then when I paid taxes on it. I can sell it at a loss, but no recovery of the taxes I paid unless it's determined to be a "valuable".
 
bflynn said:
This is one reason they’re trying to get the IRS to monitor monetary accounts.

the sale is a capital gain and you owe tax on it. Today, you can get it into a bank and nobody is watching. In the future, the IRS will see it and want you to account for where the money came from.
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And in the not to distant past. It was a Patriot Act thing. I think it expired in 2020. Wasn't so much about dodging taxes as about catching people funding terrorists. Or sumpin like that.
 
Quoted from https://www.irs.gov/taxtopics/tc409

When you sell a capital asset, the difference between the adjusted basis in the asset and the amount you realized from the sale is a capital gain or a capital loss.
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Salty said:
The cost of the panel would be losses and offset the gain at least partially. What about maintenance costs to keep it airworthy? I’d expect that to offset as well.
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Quoted from from https://www.irs.gov/publications/p551
If you make improvements to the property, increase your basis.
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But feel free to pay more if you'd like. Uncle Sam will take it.
 
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