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Started By
Message
Buying a used car for a dollar
Posted on 2/10/21 at 12:45 pm
Posted on 2/10/21 at 12:45 pm
I want to confirm my understanding of what I'd be looking at with Louisiana OMV.
Context: My mother-in-law has a beautiful car that will now collect dust due to terrible circumstances. She is open to giving us the car, but gifting it outright is not an option due to tax ramifications on their end based on their current financial planning.
That brings up the "sell for a dollar" idea. Based on the OMV website, these are the following fees necessary for used vehicle registration:
- 68.50 Title fee
- 15.00 Recordation Fee
- 8.00 Handling Fee
- 6.00 Local Fee
- License plate fee based on type/weight/selling price of the vehicle
- Sales use tax will be based on the domicile of the vehicle and will be assessed on the sales prices of the vehicle minus any qualifying trade vehicle and rebate.
If the bill of sale is $1, is the plate fee and sales tax based only on that dollar? I was expecting to see something mentioning fair market value, but didn't see any mention of that on the website.
It can't be that easy, can it?
Context: My mother-in-law has a beautiful car that will now collect dust due to terrible circumstances. She is open to giving us the car, but gifting it outright is not an option due to tax ramifications on their end based on their current financial planning.
That brings up the "sell for a dollar" idea. Based on the OMV website, these are the following fees necessary for used vehicle registration:
- 68.50 Title fee
- 15.00 Recordation Fee
- 8.00 Handling Fee
- 6.00 Local Fee
- License plate fee based on type/weight/selling price of the vehicle
- Sales use tax will be based on the domicile of the vehicle and will be assessed on the sales prices of the vehicle minus any qualifying trade vehicle and rebate.
If the bill of sale is $1, is the plate fee and sales tax based only on that dollar? I was expecting to see something mentioning fair market value, but didn't see any mention of that on the website.
It can't be that easy, can it?
This post was edited on 2/10/21 at 2:39 pm
12
Posted on 2/10/21 at 12:47 pm to 40 Rouge
I think your taxes are based on car value.
Posted on 2/10/21 at 1:07 pm to AUCE05
I assumed that, but this is directly from the Louisiana OMV website for used car registration:
"Sales use tax will be based on the domicile of the vehicle and will be assessed on the sales price of the vehicle minus any qualifying trade vehicle and rebate."
"Sales use tax will be based on the domicile of the vehicle and will be assessed on the sales price of the vehicle minus any qualifying trade vehicle and rebate."
Posted on 2/10/21 at 1:51 pm to 40 Rouge
What tax ramifications on their end? Isn't annual gift tax exemption $15k per person per recipient. As I understand it, they could each give you $15k apiece without reporting to IRS. So, $60k per year from them to you and spouse. If they exceed that, it just comes out of their $23 million lifetime gift tax exemption.
I'm no tax expert, just trying to learn. What am I missing? If
nerdwallet
I'm no tax expert, just trying to learn. What am I missing? If
nerdwallet
This post was edited on 2/10/21 at 1:53 pm
Posted on 2/10/21 at 1:53 pm to 40 Rouge
quote:
Context: My in-laws have a beautiful car that will collect dust due to terrible circumstances. They are open to giving us the car, but gifting it outright is not an option due to tax ramifications on their end.
Could you explain? If the car is valued over the annual gift amount they can use their lifetime exemption.
This post was edited on 2/10/21 at 1:54 pm
Posted on 2/10/21 at 1:54 pm to 40 Rouge
How would a $1 sale change their tax situation vs a gift?
Posted on 2/10/21 at 2:01 pm to TorchtheFlyingTiger
You're not missing anything. The annual gifting was planned out, and the lifetime exemption amount is also planned for. They have it all lined up with their accountants and lawyers.
Unfortunately, the terrible circumstances mentioned in my OP have resulted in only one in-law now, not two.
The accountants confirmed that she can't just donate the car(s) to us because of the taxes on her end. I was just looking for another option for her to offload.
Unfortunately, the terrible circumstances mentioned in my OP have resulted in only one in-law now, not two.
The accountants confirmed that she can't just donate the car(s) to us because of the taxes on her end. I was just looking for another option for her to offload.
Posted on 2/10/21 at 2:02 pm to TorchtheFlyingTiger
quote:Who the hell would report giving gift money to the IRS? It was already taxed when it was made. Why pay taxes twice on your own damn money?
As I understand it, they could each give you $15k apiece without reporting to IRS
Posted on 2/10/21 at 2:06 pm to 40 Rouge
$1.00 will raise a flag with OMV, I would put $100 and state that interior is damaged and AC doesnt work. There might also be a form that is needed to file in order to be sold for so low below FMV
Posted on 2/10/21 at 2:12 pm to 40 Rouge
quote:
The accountants confirmed that she can't just donate the car(s) to us because of the taxes on her end. I was just looking for another option for her to offload.
Unless they are extremely high net worth individuals this is still not making sense to me if one of the in laws is still living.
Posted on 2/10/21 at 2:23 pm to Bean Counting Tiger
Is their combined estate plus previously reported gifts over $23 million?
Also just read that the exclusion sunsets in 2026 so there is incentive to accelerate gifts prior. Reverts back to $5 million plus inflation each.
Also just read that the exclusion sunsets in 2026 so there is incentive to accelerate gifts prior. Reverts back to $5 million plus inflation each.
This post was edited on 2/10/21 at 2:24 pm
Posted on 2/10/21 at 2:27 pm to Bean Counting Tiger
quote:
Unless they are extremely high net worth individuals
That's the case. They've done very well. The financial setup and intricacies in the planning are extremely eye-opening and confusing. Let's just trust their team and take donating off the table.
I'm just curious about selling a lien-free car for a low price. I assumed you'd have to pay taxes on FMV even if the bill of sale was a dollar, but I was surprised to read that taxes will be assessed on the sales price on the LA OMV website. That's what triggered my post. That, and wanting to avoid having to waste time at OMV for now.
This post was edited on 2/10/21 at 2:30 pm
Posted on 2/10/21 at 2:29 pm to MIKEDATIGER
quote:
I would put $100 and state that interior is damaged and AC doesnt work.
I wouldn't go and commit fraud to save a little money on this transacation.
Posted on 2/10/21 at 3:40 pm to 40 Rouge
What a great country we live in that 2 consenting parties can’t sell a car for whatever the hell they want without the government breathing down their neck.
Posted on 2/10/21 at 3:44 pm to 40 Rouge
quote:You should talk with your in laws team that you trust. They should guide you. I can’t believe that selling it for $1 will avoid the tax implications. The value of the vehicle over the $1 would likely still be considered a gift. I can’t imagine you can avoid the gift limits simply by assigning a gift a nominal value unrelated to its actual fmv.
I'm just curious about selling a lien-free car for a low price. I assumed you'd have to pay taxes on FMV even if the bill of sale was a dollar, but I was surprised to read that taxes will be assessed on the sales price on the LA OMV website. That's what triggered my post. That, and wanting to avoid having to waste time at OMV for now.
Posted on 2/10/21 at 3:49 pm to 40 Rouge
Few things.
1) Sorry to hear about the loss of a relative.
2) If you bring a bill of sale to the DMV for $1, they are going to pull a KBB value out and use that. I've seen that happen before. If you have the price listed as something reasonable, they will take your word on it.
3) You need to look at the concept of a bargain sale. The situation you have described would likely result in the IRS considering the "bargain element" to be a gift. If the team is trying to avoid a gift (in the legal, tax sense), this isn't going to work. It's really looked at closely when related parties are involved.
1) Sorry to hear about the loss of a relative.
2) If you bring a bill of sale to the DMV for $1, they are going to pull a KBB value out and use that. I've seen that happen before. If you have the price listed as something reasonable, they will take your word on it.
3) You need to look at the concept of a bargain sale. The situation you have described would likely result in the IRS considering the "bargain element" to be a gift. If the team is trying to avoid a gift (in the legal, tax sense), this isn't going to work. It's really looked at closely when related parties are involved.
This post was edited on 2/10/21 at 3:50 pm
Posted on 2/10/21 at 4:08 pm to 40 Rouge
How much is it valued at on sites like NADA and KBB?
Posted on 2/10/21 at 5:33 pm to MIKEDATIGER
quote:
1.00 will raise a flag with OMV, I would put $100 and state that interior is damaged and AC doesnt work. There might also be a form that is needed to file in order to be sold for so low below FMV
This right here. I tried to sell a moped for $1. Notary said I had to put a “reasonable” price on the title transfer. I put $100.
Posted on 2/10/21 at 5:52 pm to VABuckeye
quote:
wouldn't go and commit fraud to save a little money on this transacation.
Then just pay them $100 and not commit anything
Posted on 2/10/21 at 5:54 pm to evil cockroach
Exactly , this ain’t my first rodeo
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