The 2014 Scottsdale auctions showed that many collectors are taking advantage of the hot market and selling cars for record prices. But many of those collectors are also learning that we are in an era of high income tax rates.
So, how can collectors minimize the tax costs?
Basic tax principles
Let’s start with some basic principles. The gain on the sale of your collector car is the difference between your net sales price and your income tax basis.
Your Read More
An SCMer wrote asking about potential liability if he sells his vintage Formula One car and the buyer is later injured as a result of a defect in the car. He knew he could clearly state that the car was being sold “as is” but wondered if that would be sufficient.
He was particularly concerned because vintage parts are not readily available and often have to be built from scratch, creating greater risk of design and manufacturing defects.
One’s first Read More
Since a 2001 Porsche Boxster S resides in the “Legal Files” garage, this letter from noted Porsche authority Pete Zimmermann caught my attention:
Dear Legal Files:
It appears that Porsche has a problem. A really big problem. All because of a bearing, to be exact, an IMS (Intermediate Shaft) bearing. That bearing is an internal engine part, and it fails. Repair cost can range between $3,000 and $20,000-plus.
Unlike past engineering mistakes, Porsche ignored the IMS bearing problem for far Read More
Last month’s “Legal Files” (December 2013, p. 40) reported on the conflicting ownership claims to the Briggs Cunningham #1 Le Mans Corvette.
The claims of plaintiff Dan Mathis Jr. took an unexpected turn when defendant Kevin Mackay’s attorney discovered that Mathis had failed to mention the Corvette when he filed bankruptcy. That put his bankruptcy trustee in control. The trustee was set to auction Mathis’s rights on October 15.
Mathis’s partners, Idoni and Borelli, had submitted a bid of $25,000, Read More
At this writing, a U.S. Bankruptcy Court trustee is set to auction off the ownership rights — whatever they might be — of Dan Mathis Jr. in regards to 1960 Corvette VIN 00867S103535.
This car is one of the legendary Cunningham Corvettes — one of the three that competed at the 1960 24 Hours of Le Mans.
The current bid of $25,000 was made by Mathis’s partners. Whether the auction will actually take place is yet to be determined, as Mathis still has time to appeal the Bankruptcy Court ruling that ordered the sale.
If the sale is completed, the winning bidder won’t know if he or she has acquired any part of the ownership of this Corvette — but the winner will be buying into a very expensive lawsuit.
A checkered past
Chevrolet was unable to compete at the 24 Hours of Le Mans in 1960 because of its participation in the American manufacturers’ racing ban. So Chevrolet gave “informal” assistance to privateer Briggs Cunningham, who entered three Corvettes in the Sarthe classic.
The Corvettes were numbered 1, 2 and 3. Car 1, raced by Cunningham and William Kimberley, and Car 2 both failed to finish. Car 3, driven by John Fitch and Bob Grossman, finished 8th overall and first in class.
This was a very impressive showing, but period racers were not terribly nostalgic about these cars. Upon return to the U.S., Cunningham decommissioned all three Corvettes, sold them as street machines, and they disappeared.
Monterey Car Week is the closest we get to automotive nirvana. We have grown accustomed to the week’s three major problems: finding acceptable accommodations, finding enough time to do everything we want to do, and getting decent dinner reservations. This year, for the first time, another problem manifested itself — car thieves have discovered Monterey.
Four collector cars were stolen during the weekend: two from Mecum, one from Russo and Steele, and one from a bed-and-breakfast parking lot in Read More
Auto leasing hit historic highs in the past couple of years and now finances about 27% of new-car sales.
Leasing is particularly popular with the luxury brands — 75% to 80% of new Mercedes-Benzes and about 50% of new BMWs are leased.
And specialty collector-car leasing companies such as Putnam Leasing and Premier Financial Services have become major players in financing collector-car transactions. J.J. Best Banc & Co., prominent in the field as well, offers traditional financing.
But leases in the collector-car market are quite different from those in the new-car market.
Traditional, new-car leases are called “closed end” leases. You lease the car for a fixed period of time, say three or five years. There may be some up-front consideration, such as a down payment. At the end of the lease term, your lease obligation ends. You can just give the car back and walk away. Or, you can buy it for the pre-determined residual value, which was set at the beginning of the lease term.
A Ferrari owner was in deep financial trouble. Business difficulties had left him pretty well broke. Worst of all, he owed the IRS more than $3 million, and an IRS agent was hot on his heels to collect.
In need of cash, the owner approached his bank for a loan. Since the IRS had filed liens for the unpaid taxes, the bank required collateral to secure a line of credit. All that was available was the 2005 Ferrari, so Read More
On April 28, Publisher Martin hosted the Round Fendered Volvo Club at his home for a viewing of the movie “Swedish Auto.” A few days later, a club member who drove his Volvo 122 wagon to the affair wrote this interesting account of the demise of his Volvo. “Legal Files” has added comments — with the club member’s permission.
I was driving on a one-plus mile stretch of residential road in Portland, OR. I was at the 25 mph Read More
Last month’s “Legal Files” illustrated how loaning your car to another can wreak havoc at the highest levels. This month, we’ll explore some more mundane situations that can be equally unsatisfying.
Let’s start with a pretty common situation — you and your friend enter a rally in your 1957 Porsche Speedster. On the second day, you trade places and your friend drives. While you’re trying to figure out where you took the wrong turn and how to get back on course, your friend gets distracted, misses a turn and crashes into a tree.
Fortunately, you both escape injury, but your Speedster doesn’t. Your friend apologizes profusely, accepts responsibility and promises to have his insurance carrier take care of the damage. How’s that going to work for you?