• FreeAdvice has a new Terms of Service and Privacy Policy, effective May 25, 2018.
    By continuing to use this site, you are consenting to our Terms of Service and use of cookies.

I won a car

Accident - Bankruptcy - Criminal Law / DUI - Business - Consumer - Employment - Family - Immigration - Real Estate - Tax - Traffic - Wills   Please click a topic or scroll down for more.

Tell it to the Supremes ( United States v. Cartwright, 411 U. S. 546, 93 S. Ct. 1713):

The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts.
An arm's length sale at the time the car was obtained seems to fit pretty well.
 


Except for the fact that if we follow that distinction without a difference, the world of taxation is turned upside down. If we sell all the stock of the corporation, did we sell the stock or the corp.? How about minority interests in any entity? If it was a completely different thing, we couldn't get discounts for restraints on alienation or control.

Bottom line, OP do what I said to do.

If the sale was an arm's length, you'll be fine.
 

FlyingRon

Senior Member
Believe what you want. I'm telling you it won't fly with the IRS. Cartright appears not to support what you are saying anyhow. It lets the IRS come up with their own standard as long as it's reasonable.

The presence of a MSRP establishes the prudent price the reasonable seller would sell to a reasonable buyer regardless of the fact that shrewd negotiation might come up with a slightly higher or lower price. It's the DEALER -> NEW CAR BUYER price that matters here, not what the FIRST BUYER -> SECOND BUYER price would be which admittedly is much diminshed in FMV.

The OP sold a ticket for $30K... Correct, not arguing that, he owes tax on the gain there.

The ticket buyer bought the right to get the winning car. He will be presumed to have won (ordinary income) the MSRP of the car. He can argue his basis is the $30K that he paid for the ticket. This is not a capital gain.
 
Pretty basic tax law on FMV here. MSRP "establishes" nothing. If the OP got the car and immediately sold it for $30K it is the same result. The IRS is not going to be able to avoid the problem of an immediate sale at arm's length--nor will they try. Valuation problems come up when someone sells it to a related party or the valuation is achieved by qualified appraisal or the person keeps the non-monetary prize. The IRS could use MSRP as it's ARGUMENT if the OP immediately sold the car to his son or his LLC or something, but, even then, who pays MSRP for a car?

It's not a matter of belief, it's a matter of the code, of the regulations and of Supreme Court precedent. (I'd include the income publication where prizes and awards are mentioned and the instructions on the 1099 itself, but those aren't really the law.)

Or, go with FlyingRon who seems to know without any support.

By the way, the IRS's thought on if a sale is a good way to value property is:
The cost or selling price is a good indication
the property’s value if:
• The purchase or sale took place close to
the valuation date in an open market,
• The purchase or sale was at
“arm’s-length,”
• The buyer and seller knew all relevant
facts,
• The buyer and seller did not have to act,
and
• The market did not change between the
date of purchase or sale and the valuation
date.
While we're at it, if I buy a new car for business, can I depreciate it at MSRP or do I have to use what I paid for it? (Let's say I buy it and then immediately put it into the business. Maybe to increase my capital account so I can take a loss on an S-corp.)

-------------------------------
For more info, see:
Regs. §1.74-1(a)(2).
Rev. Rul. 69-510, 1969-2 C.B. 23.
Rev. Rul. 55-638, 1955-2 C.B. 35.
Rev. Rul. 67-40, 1967-1 C.B. 19.
McCoy v. Comr., 38 T.C. 841 (1962).
Wade v. Comr., T.C. Memo 1988-118.
Turner v. Comr., T.C. Memo 1954-138.
 
Last edited:

justalayman

Senior Member
the fmv of the car is the sticker and that will be supported by the thousands of like vehicles sold at the sticker price (or there about).

if two parties come together and agree to a sale that is substantially below proven market value (see above), that is not an open market sale and as such, does not reflect the value of the item.

and to the who pays sticker? well, if they can prove that the typical sale is less than sticker, then they get to use that. Just because I gave somebody a deal (steal) on the purchase of something, that does not mean that is the market value.

plus, there are some cars that sell for over sticker so that is a non-issue unless we know exactly what car it is etc.

the OP has a $30k investment income to account for and whatever the ticket cost to put against that.

the other guy got a car worth ~$53k. He paid $30k for that opportunity so he has a taxable income of ~$23k from an unearned income.

the total value is accounted for and every one is happy except for the guy with the car because by the time he is done, he will have paid pretty close to sticker price for his ~$53k car.
 

LdiJ

Senior Member
Be careful using the word "gain" with respect to sweepstakes winnings. It's not a capital gain, it's ordinary income. Further there would appear to ought to be some withholding here not just a 1099 and take the car.
I disagree with this in this instance. The OP is not a sweepstakes winner. The OP bought a ticket and then sold the ticket. That is a capital transaction.

The person who bought the ticket is a sweepstakes winner.

In a sweepstakes situation regarding a physical prize, there is no ability for the charity or business to "withhold". Think about it? Are they going to hold back the engine and send it to the IRS?
 
Justalayman, rather than giving a conclusion, how about the law?

The "sticker" is NOT the Fair Market Value. (FMV) Period. Do you have a citation beyond the code, regulations, Supreme Court decision, tax court decisions, letter rulings or Revenue Rulings which differ?

I'd love for a debate, but it seems like I'm being exposed to personal opinion without support. Guide me, lead me. Tell me ANY authoritative source which differs in what I've already said and what you have said. Please, let's play. I'd love that.

Otherwise you are just a senior member who thinks things and believes what they think is the law. While there are issues in my position, you haven't even come close to them.
 

LdiJ

Senior Member
This is how I see it....

The OP has a capital transaction. He bought a ticket for XX amount of money and then sold the ticket for 30k.

The buyer of the ticket won the car, will get a 1099 for the car of 53k and will have a basis of 30k in the ticket.

If the buyer is in the 25% marginal tax bracket that means the buyer is going to have about 5750.00 in tax, bringing his total price for the car to 35750.00. That's still a pretty darned good deal for a 53k car.

Of course the buyer of the ticket probably doesn't realize that he has any basis, therefore that's likely fueling alot of his anger.
 
I disagree, but, do we care about the buyer? Our issue is the OP. What is your position there?

(If I were the buyer's representative, I suspect I'd win in a contest as to if I had "income" from my arm's length purchase. Just saying.)
 

justalayman

Senior Member
The "sticker" is NOT the Fair Market Value. (FMV) Period. Do you have a citation beyond the code, regulations, Supreme Court decision, tax court decisions, letter rulings or Revenue Rulings which differ?

I'll accept that sticker may not be FMV but the onus is upon the person claiming it to prove otherwise. Where is your support it isn't FMV?
 

justalayman

Senior Member
I disagree, but, do we care about the buyer? Our issue is the OP. What is your position there?

(If I were the buyer's representative, I suspect I'd win in a contest as to if I had "income" from my arm's length purchase. Just saying.)
what is the problem? the OP received $30k in exchange for a ticket. That ticket was a buck or whatever. The OP never won the car. If in doubt, just ask a person who picked up a winning lottery ticket from the trash and the person that claims to have thrown it away.
 
An immediate, before taking control of the vehicle, arm's length sale which follows the guidelines of:

• The purchase or sale took place close to
the valuation date in an open market,
• The purchase or sale was at
“arm’s-length,”
• The buyer and seller knew all relevant
facts,
• The buyer and seller did not have to act,
and
• The market did not change between the
date of purchase or sale and the valuation
date.
Your theory of the value?
 

Find the Right Lawyer for Your Legal Issue!

Fast, Free, and Confidential
data-ad-format="auto">
Top