0

According to this article and this article, pretty much everything I own can be considered a capital asset. According to the IRS here, when property is sold, only investment property can be counted for capital losses.

Am I correct in assuming that that example applies only to property (ex. anything else sold for a loss is a capital loss)?

I ask because often, I will purchase something and sell it later. Let's take a couch as an example. If I purchase it for $100, then, several years later, I sell it to someone else for $50, can I regard that as a long-term capital loss of $50?

That's just an example, but I imagine other things, like vehicles or equipment, would qualify, potentially allowing for a significant offset to either capital gains or personal income.

4

According to the IRS:

Almost everything you own and use for personal purposes, pleasure or investment is a capital asset.

When you sell a capital asset, the difference between the amount you sell it for and your basis – which is usually what you paid for it – is a capital gain or a capital loss.

You must report all capital gains.

You may deduct capital losses only on investment property, not on property held for personal use.

Capital gains and losses are classified as long-term or short-term, depending on how long you hold the property before you sell it. If you hold it more than one year, your capital gain or loss is long-term. If you hold it one year or less, your capital gain or loss is short-term.

...

So to answer your question, if that couch was purchased for your personal use, then you cannot deduct the loss. If you bought that couch for investment purposes, then you can deduct capital loss.

The difference between investment and personal property is what the intention was for. If you bought something with the intent to make money off of it, then that's considered an investment. However, if you:

you bought a cabin so you could get away on weekends. Although you certainly wouldn't mind making a few bucks when it comes time to sell, your primary motivation for the purchase was to have some family fun and relaxation. This would make your vacation cabin personal-use property rather than investment property.

In regards to cars and couches, if you bought a car with the intent to make a profit from it and fixed it up, etc. but ended up selling it for a loss, then you could claim that as capital loss.

  • That seems directly contradictory to your quote. "Almost everything you own and use for personal purposes [...]," implying a personal use couch does qualify. – Hari Ganti Apr 10 '17 at 20:04
  • 1
    You were asking about capital loss. So the couch counts as capital asset, but cannot be counted as a capital loss if it was used for personal purposes. It's like all squares are rectangles, but not all rectangles are squares. – Michael Apr 10 '17 at 20:06
  • Ah, so I misread "property" to mean "real estate." Perhaps this should be a separate question, but could you amend your answer to include what makes something an investment vs personal property, especially with regards to couches and cars? I could always have the "intent to sell" even if I use something regularly. – Hari Ganti Apr 10 '17 at 20:19
  • 1
    Done. I hope that clarifies better! :) – Michael Apr 10 '17 at 20:25

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.