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Rusty brain tax questions

Two quick tax questions for those who kept their brains sharp during the "off season"

  1. Taxpayer had a rusty old hulk of a sports car in their garage, has always planned to restore it, but never had the time. Taxpayer has restored a couple of other collectible cars in the past. Paid about 1. Taxpayer had a rusty old hulk of a sports car in their garage, has always planned to restore it, but never had the time. Taxpayer has restored a couple of other collectible cars in the past. Paid about $0 for it, and had it towed to their house 20 years ago at a cost of $100. A firm that restores cars for collectors just paid taxpayer $17,000 for the rusty hulk. "Collectible" capital gains rate of 25%? for it, and had it towed to their house 20 years ago at a cost of 0. A firm that restores cars for collectors just paid taxpayer ,000 for the rusty hulk. "Collectible" capital gains rate of 25%?

  1. Taxpayer's brother had a heart attack a few years ago and is debilitated from heart disease. Lives in a shack in another state on about nothing. Taxpayer paid brother about ,000 last year which was brother's only direct support, but brother incurred about ,000 in Medicaid reimbursed medical expenses. Brother is single and does not file tax return. Can brother be a dependent?

Merci!

Tom C.

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Reply to
tomchand
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  1. If the car was over 25 years old, then it may quite possibly qualify as an "antique" and therefore a collectible under Sec. 408(m)(2)(B). Particularly since it was apparently bought for its value as a particular type of car, and not for its value as a parts car or as scrap metal. The generally accepted (non-tax) definition of an antique car appears to be a car that is 25 years or older. The IRS, however, does not appear to have ruled on this issue, so it might be worth a quick phone call to whatever branch handles collectibles issues under 408(m).
  2. Assuming brother spent no other amounts last year other than the ,000 and the ,000 in medicaid-reimbursed expenses, brother's cost of support was ,000. Since Taxpayer only provided 1/3 of that support (,000/,000 1/3), Taxpayer cannot claim brother as a dependent.
Reply to
Shyster1040

I'll duck the first one but venture to say on the second that your brother is your dependent. Since he's your brother, to be a qualifying child he must be under 24 (under

19 if not a full-time student) and live with you for at least half the year. You don't mention his age; from the tone of your post I'm guessing that he is older than 24 and didn't live with you. To be a qualifying relative his gross income must be less than $3300 (the amount of the personal exemption) and you must provide over half his support. Since he's your brother he does NOT have to live with you to be your qualifying relative. The only question is whether or not Medicaid reimpursement counts as income, and I don't think that it does. See Pub 17 p. 28 ff
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-- John D. Goulden

Reply to
John D. Goulden

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