Q: Last year, I sold a car that was used in my business for the past three years. I received approximately $20,000 less than the original purchase price. Can I deduct this loss on my tax return?
A: Some years ago, automobiles were considered a good investment that may maintain or appreciate in value. However, with all our advanced technology, it is a rarity that an automobile would increase in value.
Capital gains/losses occur when a taxpayer disposes of a capital asset above or below its original cost. A capital asset would include such items as stocks, real estate, automobiles, etc., provided they were not held as inventory.
Although an automobile is considered a capital asset and a taxpayer must pay capital gains tax on the gain, the Act does not allow capital losses for depreciable items. Go figure!
Therefore, you cannot deduct a capital loss, but may qualify to deduct a terminal loss.
No, this is not a new disease. Check your numbers carefully with your tax advisor.