Is it true that when a private party sells a used car that they will claim it as a gift (in California) so that both parties can avoid paying a tax? Its been suggested to me that "everyone" does it this way and that my buyer will expect to do it like this when I sell my car. I would rather pay the tax and not worry about being penalized for breaking a tax law. Am I being wierd or is there a good reason to claim my car as a gift?
Depends on the state. Some require proof of some sort that you are a relative to receive the gift, otherwise you pay tax on the book value.
Sometimes when a car is sold privately, there will be two bills of sale. One real, one showing many $ less, for the DMV to pay the sales tax. The state does know that it is not often people give cars as gifts in real life.
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