Gift tax for truck with payments still left on it.

[n00b]

My father recently passed away and my mother wants to give me and my wife his 2011 truck. The truck has $26K in equity in it but she still owes $10K on the 0% int. loan.

She wanted to give us the truck and she said she would just pay off the $10K in the 16 months left on the 0% int. period.

If she gave us both $13K/each in the trucks equity now, that would be exempt under the current law, but would she have to file a gift tax return if she continued to make the payments?

I haven't gotten a clear answer from our estate planner or accountant yet...

Does anyone have any advice on what would be the best way for her to gift us his truck, with her continuing the payments until completion, without her having to file/pay federal gift tax?

Thx.

n00b

 

[Zigner]

My father recently passed away and my mother wants to give me and my wife his 2011 truck. The truck has $26K in equity in it but she still owes $10K on the 0% int. loan.

She wanted to give us the truck and she said she would just pay off the $10K in the 16 months left on the 0% int. period.

If she gave us both $13K/each in the trucks equity now, that would be exempt under the current law, but would she have to file a gift tax return if she continued to make the payments?

I haven't gotten a clear answer from our estate planner or accountant yet...

Does anyone have any advice on what would be the best way for her to gift us his truck, with her continuing the payments until completion, without her having to file/pay federal gift tax?

Thx.

n00b

What makes you think the lender would even agree to this?

 

[tranquility]

The value of the gift is the fair market value of the truck at the time of the gift. If the $10K was not going to be paid, it would be the value less the amount owed.

The problem is you are using the amount owed and the "equity" numbers and that is what is confusing you. Using your numbers, I'd say you are getting a gift of about $36K. The $26K in equity, plus the $10K which will be paid in this year. (Strictly speaking, you could reduce this amount by the 4 months to be paid next year. )

 

[davew128]

My father recently passed away and my mother wants to give me and my wife his 2011 truck. The truck has $26K in equity in it but she still owes $10K on the 0% int. loan.

She wanted to give us the truck and she said she would just pay off the $10K in the 16 months left on the 0% int. period.

If she gave us both $13K/each in the trucks equity now, that would be exempt under the current law, but would she have to file a gift tax return if she continued to make the payments?

I haven't gotten a clear answer from our estate planner or accountant yet...

Does anyone have any advice on what would be the best way for her to gift us his truck, with her continuing the payments until completion, without her having to file/pay federal gift tax?

Thx.

n00b

You're mistaken. If she's gifting you the $26k of equity then presumably YOU are responsible for the remainder of the loan. Equity equals the value of the vehicle less the outstanding debt on it. If she's going to make the loan payment then she's giving you the ACTUAL value of the vehicle as a gift PLUS whatever she pays on the loan.

Beyond that I'm not sure why you think she WOULDN'T have to file a gift tax return since her actual gift is clearly more than $13k each.

 

[xylene]

Make it easy on yourself...

The "gift" is the truck. The gift is what the truck is worth. The fair market value at the time given.

That value could be split between you and wife for gift tax law purposes.

What is owed on the loan is not relevant to determining value. It is odd to think of 'equity' in a motor vehicle, since for an auto loan the loan payoff cost will virtually always exceed the vehicle's value, especially when factoring in depreciation... as I assume from your wording this is not a new vehicle.

And lastly, as zigner mentioned,

If she wants to give you the truck, she has to pay off the loan, or else how could she possibly transfer title to you and your wife.