Does anyone know why it is thought to be more legally sound to sell an asset (car, antiques, horse, etc.) to a family member or grandchild for $1-$10 rather than gifting the item?
I paid my sister $50 for a car once so I only paid sales tax on the $50. If it were a gift I would have had to pay tax on the blue book value of the car.
You can be gifted up to $14,0000 (in my state). The benefactor does not have to pay taxes, and it is a write off for the gifter for year end taxes. Most "gifting" is done around now for year end taxes.
Check with an accountant or financial advisor to be sure though.
Several possibilities- there is a limit to the amount that can be gifted in a year without tax consequences. A sale also creates a contract as opposed to a gift, which is revokable in many circumstances. It depends on the circumstances.
That might be something an accountant could tell you for sure but I think it has to do with the taxes the person getting the item has to pay on it.
Pretty much for tax purposes because it can save the person being "gifted" substantial money due to taxes.
It is best to be discussed with your tax and legal counsel first to make sure you follow the procedure to the "t" for the IRS.
Misunderstanding how gift tax and property transfer laws work, mostly.
In some cases, it is an attempt to work the Medicare system. (Half the time, the person doesn't even realize it isn't a "loophole" but an actual illegal action.)
It has something to do with the taxes on things like used cars. I think if your selling to a family member you can avoid the used car tax.
I think there is a connection between sales tax paid on a "free" item vs. one with a cost attached. I'd ask the auto insurance agent because this may vary from state to state, or based on the value of the car. My mother signed over the title of her car to my son for $1 and I know she checked on it first with her attorney.
Not sure about antiques or livestock.
I believe there is a limit on how much someone can give a family member per year without taxes. It used to be $10,000 but I'd check it with your tax accountant or lawyer.
And I do hope that no new member will click on SuperSoccer's links. It's a crazy non-answer to the question, and her other post is delusional. This is a troll folks - don't send a flower, don't click on links.
It will be harder to take back or audit a sale than a gift for inheritance purposes.
