The Tax Questions Blog

Question: If I was given a car as a tax-free gift (paid $1), is the profit from a future sale taxable (as income)?

Basically, I was given a car worth $15,000, which is not taxable because it is joint property of my parents (they are allowed to give just over $20k per year of shared, physical property to a child, tax-free). I will count the sale price on the title transfer as $1. If I sell it next year, say for a $13k profit, will this add $13k to my taxable income?

Answer: You're in pretty good shape here although I'd be sure to say an extra big Thank You to your parents. Together they can give anyone (not just children) up to $24,000 per year without incurring gift tax (annual exclusion of $12,000 time two since it's both your Mom and Dad together). Your parents will not have gift tax here so they're OK.

You DO have to pay tax on the sale of personal property but you won't have a gain. You pay tax for any amount over your tax basis and you will acquire the basis of the donor. Just make sure you know what your parents paid and have records. Also document the gift and you should end up selling for less than your tax basis and not have a capital gain to report. In the very unlikely event that the car sells for more than your parents paid then you would realize gain when you sell and need to pay tax.

Make sure you document things and you should not have any tax to pay here.

Someone Is Mad At Rihanna…

Via The mother of 6 year old Jasmina who lost her battle with Leukemia last month: Uh oh… Updated: Via Bitchie Mail So Jasmina’s mother deletes the tweet and STILL has her avatar pic as Rihanna and her daughter. *DEAD*. I hope SHE is enjoying the publicity . I, unlike some very ignorant Rihanna stans, chose not to [...]

Related posts

• Sorry, no related posts at this time.