Ron Natalie wrote:
wrote:
A question came up over pizza the other night.

What are the tax consequenes of selling a homebuilt?

Assume we know how much the raw materials cost.
Assume we know approx how many hours of labor went into it.

Assume the homebuilt is worth $200K

If it is sold what are the tax implications?


Labor (unless you paid someone to do the labor)
has no bearing on the issue. You are presumably
doing this for recreation or education, that is,
not as a business. You have a capital gain on
the difference between what you spent on the
materials and the what you sold it for. If you
have a loss, however, that is not deductible.

I don't think capital gains applies there. The materials weren't
purchased as an "investment". I believe that the IRS or (Revenue Canada
up here) would have to see a pattern of construction and sales of
aircraft that would indicate that the activity is professional in nature
before they would consider the profits from the sale as income.

I would certainly not report the proceeds of a single aircraft built
over 4 years as income or capital gains any more I would over a car I'd
restored, unless I was doing it full time specifically as a source of
income.

John