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Paying taxes on a gifted privately sold vehicle
Posted on 2/10/16 at 9:03 am
Posted on 2/10/16 at 9:03 am
I've read/heard differing answers on this.
Car was initially bought and paid for by parents. Years down the road, the car was put under my name by completing an "act of donation of a movable" and title transfer.
Typically when selling, it's at a a net loss, and therefore no taxes are owed.
Now, I am selling the car for a profit bc I did not originally pay for it. What, if any, taxes am I responsible for?
From what I've gathered, the cost basis is either what the parents initially paid, or what the vehicle was worth when it was gifted. Either way, it would be a net loss and no taxes owed?
How is the value of the cost basis determined?
Car was initially bought and paid for by parents. Years down the road, the car was put under my name by completing an "act of donation of a movable" and title transfer.
Typically when selling, it's at a a net loss, and therefore no taxes are owed.
Now, I am selling the car for a profit bc I did not originally pay for it. What, if any, taxes am I responsible for?
From what I've gathered, the cost basis is either what the parents initially paid, or what the vehicle was worth when it was gifted. Either way, it would be a net loss and no taxes owed?
How is the value of the cost basis determined?
This post was edited on 2/10/16 at 9:12 am
1
Posted on 2/10/16 at 9:13 am to Books
quote:Your basis in the gifted vehicle is the lesser of the donor's basis or the FMV of the property at the time of the gift. If the sales price is less than the FMV when you received the vehicle, then you are selling at a loss, and there is no tax.
Now, I am selling the car for a profit bc I did not originally pay for it. What, if any, taxes am I responsible for?
Posted on 2/10/16 at 9:20 am to Poodlebrain
quote:how is this determined? Selling privately, I'm able to sell it for significantly more than the KBB value.
or the FMV of the property at the time of the gift
Posted on 2/10/16 at 9:45 am to Books
quote:
how is this determined? Selling privately, I'm able to sell it for significantly more than the KBB value.
If it is a unique, high end, specialty car, I would have gotten an appraisal at the time of the gift to establish the FMV.
If it's just a standard everyday vehicle, I would use KBB private party value at the time of the gift to establish that.
I am impressed that you can sell it for significantly more than KBB value. You must have an idiot for a buyer =)
Posted on 2/10/16 at 10:23 am to LSUFanHouston
quote:
If it's just a standard everyday vehicle, I would use KBB private party value at the time of the gift to establish that.
I'm betting KBB at the time of the gift may still be less than what I'm selling for now. However, if my parents had sold it privately at the time of gift, then they'd have gotten more than I will now.
Is this something I need to worry about with the IRS/DMV looking into?
This post was edited on 2/10/16 at 11:45 am
Posted on 2/10/16 at 10:32 am to Books
quote:
I'm betting KBB at the time of the gift may still be less than what I'm selling for now. However, if my parents had sold it privately at the time of gift, then they'd have gotten more than I will now.
Is this something I need to worry about with the IRS/DMV looking into?
DMV is only going to care about the sales price when you sell it, and that they get the sales tax out of it.
Basis must be proved by the seller in the event of an IRS audit. The IRS initial assumption is your basis in the vehicle is zero, and you have to prove otherwise. You can use KBB value at time of gift as proof and be fine.
However, if you want to use a higher value, you are going to have to be able to prove it. Simply saying "my parents could have sold it for more" is not going to cut it. You need something more concrete. An appraisal will work. But I don't know if you will find someone willing to do an appraisal after the fact
KBB is supposed to be an updated reflection of actual values. It seems odd to me that KBB would be off by such a big margin on a vehicle.
Posted on 2/10/16 at 11:35 am to LSUFanHouston
The only time the IRS expects to see a gain from the sale of a vehicle is when the vehicle has been used in a trade or business, and depreciation has been claimed. Otherwise, the IRS works on the presumption that vehicle decline in value over time. The IRS will not even be aware of the sale until it gets reported on a tax return. Why bother reporting the sale of a personal asset at a loss?
Posted on 2/10/16 at 12:07 pm to Poodlebrain
quote:
Why bother reporting the sale of a personal asset at a loss?
I would not.
I was responding to how the IRS would view the basis of a vehicle.
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