"selling price" or "gift" / transfer of title

Is it true that when a private party sells a used car will claim it as a gift (in California) so that both parties can avoid paying a tax? This sounds like a law not worth breaking. But 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. What do I do?

Thank you, Brian

Reply to
Brian
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Are you really asking advice about violating the law or not? You need to figure this one out for yourself, big guy.

Reply to
Truckdude

Rant time: I'm in NY state, but your situation sounds like a very familiar/similar scenario.

I sold my '98 Corolla to my niece - although technically to my sister (niece will get it as her own at some future point when in college) - 2 years ago. It was a sale, not a gift, and we didn't want to skirt the law. But we knew that selling to a family member is also tax-exempt.

So... went to the NYS DMV website & downloaded the pertinent form to fill out. Only to read the directions & find out that the tax break is only for a sale to a parent, step-parent, child, or step-child. No siblings mentioned. But that didn't make sense considering that siblings are blood relatives, where-as step relatives aren't.

So... my sister's husband (since he's retired, but both she & I had to work that day) spent an entire day going to the nearby DMV offices & phoning other ones (& being kept on hold for incredible lengths of time), trying to get an answer. He was told maybe, yes - that they just didn't bother to include siblings in the list, & no - all from various DMV people. He finally phoned Albany (state capital office) who told him no - siblings aren't included, but we could just list it as a gift & avoid the tax that way! IOW - he was being told by the main office that we should just lie about it! Arghhhh!

We actually considered it - until reading that in the case of being caught,

*each* party is fined $10K. We had no desire to take the chance of being made expensive examples, so they paid the tax. Like the State didn't get already enough tax dollars when I bought it new?! Double arghhh.

Then, it dawned on us that - given the motivation, I could've sold it to one of my parents, then they could've turned around & sold it to my sister, & both of those transactions would've been tax-exempt. Triple arghhh.

So... good luck!

Cathy

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Reply to
Cathy F.

I don't know about the 'gift' law with regard to California DMV, but one thing you probably shouldn't try is to falsify the sale price (at least too much.) If you march into the DMV and tell 'em you paid $800 for a two year old Cadillac, they'll likely ask you whether it's in a bushel basket, disassembled. They may be bureaucrats, but they're not stupid, and they've heard all the lame excuses over and over.

Reply to
mack

I just sold my old lincoln a few months back for a grand total of a $1. My friend who bought it never had any problems registering it.

Reply to
Reasoned Insanity

In VA you pay tax on the NADA value of the vehicle regardless of the selling price.

Reply to
badgolferman

Many states simply charge you the tax based on average sale price unless you're related in very specific ways (brother, sister, father, mother, etc...), regardless of the bill of sale price from a private party transaction. Aunt, uncle, cousin are often not included.

Personally, as a seller, what's in it for me to commit fraud? Nothing!

Reply to
B A R R Y

When selling to a sibling & they are not included in the "family members" tax-exempt status - yet step-parents & step-children are, it's mighty annoying!

Cathy (NYS, where such is the case)

Reply to
Cathy F.

To get back to this last part of your post...

If other states' paperwork is similar to that of NYS's, then yes, there is an incentive, unfortunately: the sale of the car you're trying to unload.

*Both* parties have to fill out the paperwork; not only does the buyer have to fill out, sign, & submit a form declaring the car to be a gift, but so does the seller. If one seller refuses to do it, the buyer - wanting to save a few (to several) hundred bucks, may very likely go to another seller instead - who is willing to do it.

Cathy

Reply to
Cathy F.

Possibly, but not in my experience.

Before my state passed the "book value" tax rule, I was asked on several occasions to put a fraudulent price on a bill of sale. The vehicles ranged from $500 used vans to a $15,000 one-year old Jeep. I refused every time, and I sold the car every time.

Reply to
B A R R Y

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