As those in the business know, however, the downside of investing in classic cars or other collectibles is the prodigious capital gains rates that come with their sale. While you can still come out of a classic car sale with a tidy sum, you would likely balk at the 28% hit to your profits that accompanies these transactions.
While an exchange involving personal property is conducted in much the same way as a real estate exchange, it is important to note that in a personal property exchange, one has less leeway in terms of what will fulfill like-kind requirements. If you are exchanging a car, you will only be able to exchange it for another car of equal or greater value. The same rule applies to any piece of personal property used in an exchange.
Currently, there is a very high level of demand for collectible items, especially classic cars, which have appreciated greatly in value. You may be thinking that this is the right time to sell, and to cash out on the good investment decisions of yesteryear.
You’d be right, but you’d do well to consider the possibility of a 1031 exchange. A 28% capital gains tax represents a large portion of your profits, and if you’re like me, you’ll take the option that allows you to reinvest that money, maximizing your potential profits.
United States property investors can save their money by utilizing a 1031 exchange to defer all of their capital gains tax on the sale of investment property. A 1031 tax exchange is like an interest free loan from Uncle Sam!
1031 Tax Exchange Information 