Simple question: In California, what are the consequences of selling a car to a friend for $1? Are there any tax consequences for ME, or any income tax issues for the friend? I think there are, but haven't found anything concrete to guide me. Basically I just want to give the car to him and be done with it.
Comments?
No consequences other than the new owner will have to pay use tax on the actual value of the car. If the car isn't too new, you're better off giving him a bill of sale for a few hundred dollars.
I've done that before when I lived in CA. Usually for something like $165 or some odd amount. That keeps all the fees realy low for the buyer and doesn't cost the seller anything when transfering the title. There are no tax issues for either of you that I know of unless you're transfering an obviously expensive car that he sells right away for a profit. Giving a 1982 Cutlass w/ 165k on the clock to someone for $1 is a lot different than doing it with a 1997 Porsche w/ 18k on it. Only one will raise flags at the DMV. ;)
You can also write on the bill of sale that the car is "in need of major repairs" and make sure the bill of sale says 'sold as-is with no warrantee'. Then he won't have to be at the mercy of a crabby DMV clerk who's having a bad day trying to explain why the car was sold for virtually nothing. The CA DMV doesn't require any kind of inspection to transfer title, but will require a smog certificate to issue plates or tags. Basically, you can own anything you like in CA whether it passes smog or not, you just can't drive it on the road if it doesn't pass.
I know CA law does not allow the transfer of a motor vehicle for $1 to anyone but immediate family members (parents, spouse or children). I bought, repaired & sold a lot of motorcycles when I lived out there and was a regular customer at the DMV in Fremont from 1988 to 2001. Never had a dealer's license, though I don't think the rules are any different about title transfer for them aside from the whole dealer 'temp plate' deal and the fact that they have a shorter line at the DMV.
Cheers, - JJ
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