Question

I bought my car at lease end, then turned around and sold it for more than I bought it for. Is this a short term capital gain? Is the basis the amount I bought it for?

Forum|Forum|4 years ago
January 24, 2022
2 replies
0 views

My lease contract said I could buy my car for a fixed price at the end of the lease term. Due to the current car shortage, I learned that I could sell the car for much more than this fixed price. So I bought the car for the fixed price and then immediately sold it for more.
I am trying to confirm that the following assumptions I've made are correct:
- The payments I made during the lease term do not factor into the cost basis or gain realized.
- The fact that I had the car as a lease for 3 years prior to purchasing and reselling it does not "count" toward the amount of time I held the asset. In other words, it would be a short term rather than long term capital gain.

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ColeenD3

Yes, your assumptions are correct. You did not buy the car until the lease ended. It is short-term.

T

thesimroths

I did the same thing - sold the car about three weeks after buying from the leasing company. However, before I could resell the car, I had to put the title and registration in my name. Can I include those costs ($106.50) in the cost-basis for the car? Thank you.

O

Opus 17

Employee

@thesimroths wrote:

I did the same thing - sold the car about three weeks after buying from the leasing company. However, before I could resell the car, I had to put the title and registration in my name. Can I include those costs ($106.50) in the cost-basis for the car? Thank you.

No.

However, I wonder if part of your lease payments should be included in the cost basis.

@Hal_Al , @Carl11_2 , @rjs any ideas?

ColeenD3

Nowhere in IRS literature does it express that these are included in the basis of a vehicle.

In terms of registration fees, the IRS does say this:

Actual Expenses - To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that's business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.