Tuesday, January 25, 2011

Reporting the sale of your RV

Q.  After 15 years, it's time for me to buy another motorhome and after reading some of your posts, I realize there may be more to this than meets the eye. Basically, what are the income tax ramifications under these 4 scenarios:
  1.  I trade in the old coach?
  2.  I sell it privately?
  3.  I give it to my son? or
  4.  I donate it to charity? 
Your advice please. JE, Mississippi

A.  First, some general rules:  Anytime you sell a personal asset at a gain, it is a reportable and taxable event. Anytime you sell a personal asset at a loss, since you cannot take the loss on your tax return, most people don't report the sale on their tax returns. You didn't mention if you ever used your coach for business purposes, but if you did, you need to calculate the tax basis, and to the extent you used it for business, you will report the sale in the year sold, and will recognize either a business gain or a business loss.

  1. If you trade in the coach, the trade-in value allowed would be the same as the selling price. Also, on a trade in, if you use the coach for business, it is quite possible to have a tax free exchange, if the asset is sold at a gain. You wouldn't want to use this approach for a loss, which most often, will be the case.
  2. Same as #1 above other than here you would be actually receiving the sales price directly in the form of cash or a check.
  3. If you give the coach to your son, your remaining basis becomes his basis and under current law, you can gift up to $13,000 without having to file a gift tax return.
  4. If you donate your coach to charity, usually the charity will sell the coach and separately report the sales proceeds they received  to you. This is the amount you can take for a tax deduction.
Tax Tip:  If you ever use any part of your RV for business purposes, always keep track of your basis. You never know when just the right deal comes along and, on a lark, you decide to buy a new rig. Stay prepared!

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