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When you sell your car, only the portion of the selling price that exceeds the adjusted basis of the car is taxable gain. For example, if your car has an adjusted basis of $5,000 and you sell the car for $6,000, you have a gain of $1,000. If your basis is less than or equal to what you paid for the car, you don't have to include the income from the sale on your tax return.
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