For US tax resident
If car is traded in for a higher value car and the trade in value of the car is higher than the purchase price of the car, considering long term (>1yr)? Will there be any capital gains tax owed even after trading in?
A 2015 Toyota Corolla purchase in year 2017 for 13k, now trading in that car to purchase 2017 Rav4 for 25k. Trade value given by dealer is 18k (more than actual value, due to chip shortage), so the total cost after deducting trade in value would be (25-18) = 7k.
In this scenario, capital gains would be (18-13) = 5k.
Just want to know whether there is any exception for trade in.