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View Full Version : Finding the mimumim sale price for a car when selling to family?


Th0r S1mpson
03-28-07, 01:36 PM
I have used KBB, but if purchasing a car from a family member, where does one look for the minimum value that can be used for that model to minimize sales tax on the transaction, etc?

My understanding is that when the car is taken in for licensing etc etc for the new owner, that information will need to be presented and it will have to line up with some sort of industry standard.

I'm fairly new to this, so may my understanding is off a bit. Any help?

Numanoid
03-28-07, 01:37 PM
I've sold cars to friends for $1. I don't believe there has to be a minimum price based on worth.

Minor Threat
03-28-07, 01:51 PM
I've sold cars to friends for $1. I don't believe there has to be a minimum price based on worth.

ditto.....

The Bus
03-28-07, 01:51 PM
Depends on state regulations. You can write the sale price of the car but have to pay some tax. You can write the wrong transfer, which would be illegal.

Use some mix of KBB, Edmund's, Automotive.com, and what Uncle Freddy thinks.

4KRG
03-28-07, 02:09 PM
Thor - you should check on how your state handles this, if they really don't "enforce it" (meaning a low value immediately sets off a flag) then you can sell the car for whatever you want. Sure it might be against the law, but define the word "is" for me :)

or you can sell the car to them for $1 and the tires for $2000 each as a separate transaction :)

No one claims the car is in perfect working order when it is sold (ie. what blue book value is based on) so no one can argue your car was worth full blue book.

satellite
03-28-07, 02:13 PM
I've sold cars to friends for $1. I don't believe there has to be a minimum price based on worth.

same here - there is no minimum in my state.

Morf
03-28-07, 02:18 PM
I've sold cars to friends for $1. I don't believe there has to be a minimum price based on worth.

My grandfather sold me one for $100. I wrote him a check for $100, he handed me a $100 bill and the keys. :lol: All he wanted was the papertrail.

RunBandoRun
03-28-07, 02:18 PM
I gave my oldest niece my 1985 Buick Somerset when I bought a newer car. I think I made out a bill of sale for a hundred bucks so she'd only have to pay taxes on a hundred bucks. But I don't think there was a minimum.

Th0r S1mpson
03-28-07, 02:23 PM
I thought you could sell for whatever you wanted as well. We sold a really old car for $100 once. But it was a junker. This is a 2006.

My uncle said that when the ownership is transferred we would need to present the purchase and sale agreement, bill of sale, and that it would have to meet the minimum accepted value for the sale of that car.

This is in Washington State. I'm trying to find out more about it but have come up empty so far.

imperator505
03-28-07, 02:29 PM
I'm not from around here but...

The price of anything is what the buyer is prepared to pay isn't it?

Are you saying that there is a tax levied on the vendor based upon some notional "open market" value?

As someone else has said, the condition of the vehicle would not be known to the authorities. With a car the condition is a very important factor in determining the price.

What is to stop the car being a gift if you wish. Is there a threshold for gifts in a tax period below which no tax is payable?

Th0r S1mpson
03-28-07, 02:30 PM
It looks like the issue may be one of Use Tax is Washington?

http://www.dol.wa.gov/vehicleregistration/usetax.html
Use tax

<B>Use tax is a tax on items used in Washington when sales tax has not been paid.</B> When you purchase a vehicle or vessel from a private party, you are required by law to pay use tax when the vehicle or vessel title is transferred.

Use tax rates

Use tax is calculated at the same rate as the sales tax at the purchaserís address. In addition to the general use tax rate, vehicles are charged an additional 0.3% motor vehicle sales/use tax.

Frequently asked questions
Whatís the difference between sales tax and use tax?

<B>Unlike sales tax, use tax is based on the average fair market value of the vehicle or vessel rather than the purchase price.</B>

Why use average fair market value and not actual sale price?

Fair market value reflects the value of a vehicle according to the retail selling price at the place of use, compared to similar vehicles of like quality or character. <B>The actual selling price may or may not be the same as the average fair market value in cases when an individual sells a used vehicle or vessel.</B>

<B>How is the fair market value determined?</B>

<B>We get average fair market values from National Market Reports (NMR), an industry standard source.</B>

What if a vehicle or vessel is worth less than the average fair market value?

To establish that a vehicle or vessel is worth less than the average fair market value, the buyer may:

* present an estimate of repairs prepared by a registered mechanic.
* present an appraisal prepared by a registered dealer.
* provide documentation from another value source, such as National Auto Dealers Association (NADA) or Kelley Blue Book that cites a lower average fair market value for the vehicle or vessel. The purchase price will be accepted if it is within $2,000 of the value cited by the alternate source. Either photocopies of printed materials or a printout from the Internet are acceptable.
* present a Adobe PDF iconDeclaration of Buyer and Seller Regarding Value of Use Vehicle Sold form stating the selling price and condition of the vehicle. Both the buyer and the seller must sign the form. These are subject to review.

<B>Does the Department of Revenue use the same valuing system?

Yes, the Department of Revenue uses exactly the same values as the Department of Licensing. Since 1999, both agencies use an automated valuing system that receives data from National Market Reports (NMR).</B>

What if I receive a vehicle or vessel as a gift?

* If you can provide proof that the person who gave you the vehicle or vessel paid sales or use tax on the vehicle or vessel, no use tax is due.
* If the person who gave you the gift owned the vehicle for 7 years or more and is from a state or province with sales tax, it will be assumed that tax was paid and no proof is needed.
* If the vehicle or vessel is coming from a state or province without sales or use tax, use tax is due.


So I guess my question is, can I figure out what the NMR is going to come up with? Man, I'm confused.

RunBandoRun
03-28-07, 02:32 PM
It looks like the issue may be one of Use Tax is Washington?

http://www.dol.wa.gov/vehicleregistration/usetax.html


So I guess my question is, can I figure out what the NMR is going to come up with? Man, I'm confused.

You could check at the Kelly Blue Book website. www.kellybluebook.com

Numanoid
03-28-07, 02:36 PM
You could check at the Kelly Blue Book website. www.kellybluebook.comAnd you could read the first post:I have used KBB;)

Th0r S1mpson
03-28-07, 02:37 PM
Yeah, I've been there (KBB). I wasn't sure which condition to use but it looks like if we used the poor condition we would need to provide an estimate for repairs. Good condition is probably more accurate so maybe that's the value we use. Excellent condition would basically be brand new.

Regarding the gift question, since the value is over 10K it would then be subject to the gift tax which isn't very pretty. Plus, we will be purchasing the car, we just haven't determined a final price yet. But even if we bought it for a low price it looks like we still need to pay full sales tax value (use tax) on the vehicle, which will be a close to a couple thousand dollars.

CPA-ESQ.
03-28-07, 02:39 PM
All you do is this.

Write up a bill of sale for a couple hundred dollars or a thousand dollars and make sure in big bold letters is this wording

Buyer notes that the car needs major engine and transmission work estimated at $_______

fill in the difference between blue book and selling price.

Th0r S1mpson
03-28-07, 02:40 PM
All you do is this.

Write up a bill of sale for a couple hundred dollars or a thousand dollars and make sure in big bold letters is this wording

Buyer notes that the car needs major engine and transmission work estimated at $_______

fill in the difference between blue book and selling price.
Car has 3,000 miles on it and it needs engine work valued at $15K? Right.

I'm just looking for the proper (legal) way to do this while minimizing the tax burden.

It looks like we do the sale at whatever price we want and pay use tax on the remaining difference.

imperator505
03-28-07, 02:42 PM
It looks as though the actual sale price is not really relevant. The tax is based upon the "average fair market value" unless you can show that it is worth less......

To establish that a vehicle or vessel is worth less than the average fair market value, the buyer may:

* present an estimate of repairs prepared by a registered mechanic.
* present an appraisal prepared by a registered dealer.
* provide documentation from another value source, such as National Auto Dealers Association (NADA) or Kelley Blue Book that cites a lower average fair market value for the vehicle or vessel. The purchase price will be accepted if it is within $2,000 of the value cited by the alternate source. Either photocopies of printed materials or a printout from the Internet are acceptable.
* present a Adobe PDF iconDeclaration of Buyer and Seller Regarding Value of Use Vehicle Sold form stating the selling price and condition of the vehicle. Both the buyer and the seller must sign the form. These are subject to review.

...which seems a bit bit tiresome - deliberately so, I suspect.

imperator505
03-28-07, 02:46 PM
Car has 3,000 miles on it and it needs engine work valued at $15K? Right.

I'm just looking for the proper (legal) way to do this while minimizing the tax burden.

It looks like we do the sale at whatever price we want and pay use tax on the remaining difference.

It looks as though you would have to...

present a Adobe PDF iconDeclaration of Buyer and Seller Regarding Value of Use Vehicle Sold form stating the selling price and condition of the vehicle. Both the buyer and the seller must sign the form. These are subject to review.

EDIT: does "subject to review" mean that they might make checks on some of these declarations?

Th0r S1mpson
03-28-07, 02:55 PM
EDIT: does "subject to review" mean that they might make checks on some of these declarations?
I guess. That would make sense to keep people from cheating the system as was suggested above by the repair idea.

However, It doesn't seem right to have to pay so much to the state under these circumstances but what are you going to do...

In Washington State you can't hand someone something worth more than 12K without giving at least $1,000 to the state. Even if it's a gift (you then would pay a gift tax instead of use tax). Never mind that the item has already been taxed.

Don't even get me started on the Death tax.

imperator505
03-28-07, 03:07 PM
Don't even get me started on the Death tax.
What are they going to do if you don't pay? Sue you?

What is the average fair market value for a corpse these days anyway?

Th0r S1mpson
03-28-07, 03:11 PM
What are they going to do if you don't pay? Sue you?
No, they'll sue whoever you leave your money / house / car / property / business to. For 19% of its value.

I suppose you could just leave everything to the state. Why not.

imperator505
03-28-07, 03:18 PM
No, they'll sue whoever you leave your money / house / car / property / business to. For 19% of its value.

I suppose you could just leave everything to the state. Why not.
Plan A - live for ever
Plan B - spend your last dollar on the day you die.*

*I don't see why the kids should inherit it anyway. They can work for what they get, like we had to dammit.

Th0r S1mpson
03-28-07, 03:48 PM
Okay, back on subject. :lol:

4KRG
03-28-07, 04:26 PM
Thor, it looks like you can use internet printouts to determine value :)

Search ebay for closed auctions and find 3 that match your car within the last couple months.

Go to car max and tell them that you want to trade the car and have them give you a trad in value

Either way you should end up on the legal low side and have printed proof.

No car is better than 'fair' condition at a trade in :) If you have a really dishonest dealer somewhere, go ask them for a written trade in value (act like you want another car) then will low ball the hell out of you.

jrobinson
03-28-07, 04:48 PM
In Washington State you can't hand someone something worth more than 12K without giving at least $1,000 to the state. Even if it's a gift (you then would pay a gift tax instead of use tax). Never mind that the item has already been taxed.
I might be reading this wrong, but I am pretty sure you are wrong. You can gift up to 11K tax-free to an individual. Beyond the 11K is taxed.

Th0r S1mpson
03-28-07, 05:12 PM
I might be reading this wrong, but I am pretty sure you are wrong. You can gift up to 11K tax-free to an individual. Beyond the 11K is taxed.
That does make a big difference. Good to know! :up:

Th0r S1mpson
03-28-07, 05:13 PM
Go to car max and tell them that you want to trade the car and have them give you a trad in value
I'm not sure trade-in value would work here.

KBB treats trade-in values and sale values as two completely different things when estimating their prices, but I don't know about the state.

ernestrp
03-28-07, 05:18 PM
It looks as though the actual sale price is not really relevant. The tax is based upon the "average fair market value" unless you can show that it is worth less......

My sister had that problem a couple of years from a car she bought at a dealer and the tax was based on more than what she paid. She called the tax office from where the bill came and they said tough luck you get to pay the FMV of the vehicle. I guess even if it had major problems and you paid to have it fixed it would still be the FMV. My current vehicle had to have the transmission replaced around 25,000 miles without it it was worthless, 3,000.00 later it was worth the FMV, I guess.

-popcorn-

4KRG
03-28-07, 05:40 PM
I'm not sure trade-in value would work here.

KBB treats trade-in values and sale values as two completely different things when estimating their prices, but I don't know about the state.

It would be good to find out.

Car max fits under fair market value - you have to sell the car today, your only available buyers are car max or your family friend. That is a market when you don't have time to sit around and find the seller willing to pay the highest price.

Or estimates off ebay are more fair market value too.

Here is an example for you - when the ford explorers were killing people, their value dropped tremedously making KBB value meaningless. Car max trade ins and ebay still retained actual market value

If audited, it is a point I would argue to death and I don't think anyone could 100% refute.

LurkerDan
03-28-07, 05:42 PM
WA is one of the worst state's for this. I dealt with this many years ago, I had a piece of crap car and they wanted me to pay tax on way more than its value. I had to go to (I think) 3 dealers and have them write estimates.

But as has been noted, I don't think you need to worry much about what the sale price is. Sell it for whatever you want (or buy it for whatever the family member wants for it). But be prepared to pay that tax unless you otherwise prove it is worth less, the sale price won't matter. If you want to know what the value is that they use, call and ask.

imperator505
03-29-07, 03:36 PM
What if I receive a vehicle or vessel as a gift?

* If you can provide proof that the person who gave you the vehicle or vessel paid sales or use tax on the vehicle or vessel, no use tax is due.
Does this mean that if the person making the gift paid the sales/use tax when they acquired the vehicle, then no further tax is due when it is gifted to someone?

Presumably you paid one of those taxes when you got the car? Can you just give the car to the relative (and make any necessary financial adjustment outside of the recorded transaction)? If you can provide proof that the tax was paid.


PS
Okay, back on subject.
Sorry :D2: