Is sale of an automobile to pay bills taxable?

[troutette]

What is the name of your state (only U.S. law)? FL

A friend of mine sold me a car. It's value was $38,000 but he sold it to me for $3,000. I then sold it for $27,000, then bought another car for $6,000.

Is this something that should be reported as capital? Is the money made on the car considered income? I have used the profit of the sale to live off of since I am unemployed.

I have been asked to complete a financial affadavit for a family law issue.
How do I report this?

 

[Zigner]

This really seems fishy - bordering on fraudulent.

 

[HappyWanderer]

I agree with Zigner, this smells all the way over the internet. But, to answer your question, yes, you must report the income. One main difference in the sale of personal use property is that you can't deduct the loss. The income is still taxable.

 

[troutette]

I'm really not sure what you mean by fraudelent. I didn't have a car, so this friend of mine, who is very wealthy sold it to me for cheap. After about 6 months, I was unemployed and needed the money, so I sold the car for a cheaper one. Money ran out again, so I then bought another cheaper one. All money off the car was used to pay bills. No other income coming in.

I'm not trying to hide anything from the IRS or on my financial affadavit. I just want to know how to report it properly.

Not sure what I did wrong here???

 

[Zigner]

I'm really not sure what you mean by fraudelent. I didn't have a car, so this friend of mine, who is very wealthy sold it to me for cheap. After about 6 months, I was unemployed and needed the money, so I sold the car for a cheaper one. Money ran out again, so I then bought another cheaper one. All money off the car was used to pay bills. No other income coming in.

I'm not trying to hide anything from the IRS or on my financial affadavit. I just want to know how to report it properly.

Not sure what I did wrong here???

I avoided saying it actually WAS fraudulent. Your scenario is plausible...but definitely one that will make people take a closer look at things.

 

[troutette]

I avoided saying it actually WAS fraudulent. Your scenario is plausible...but definitely one that will make people take a closer look at things.

Closer look into what? Like I said I just want to know how to report it to the IRS and how I report it on my financial law affadavit.

How/what form would I use to report to IRS?

 

[Zigner]

Closer look into what? Like I said I just want to know how to report it to the IRS and how I report it on my financial law affadavit.

How/what form would I use to report to IRS?

Financial affidavit - seems to me that you received a gift of the value of the car, minus what you paid for it. You paid $3,000 for a car valued at $38,000 - that's a $35,000 gift. It won't trigger any taxes for you - and you could argue that the value of the car was actually $27,000 - NOT $38,000 (since you only were able to sell it for $27,000), which would lower the gifted amount to $24,000

 

[troutette]

Financial affidavit - seems to me that you received a gift of the value of the car, minus what you paid for it. You paid $3,000 for a car valued at $38,000 - that's a $35,000 gift. It won't trigger any taxes for you - and you could argue that the value of the car was actually $27,000 - NOT $38,000 (since you only were able to sell it for $27,000), which would lower the gifted amount to $24,000

So are you saying I don't have to file anything with the IRS on this or do I file some type of gift form?

 

[Zigner]

So are you saying I don't have to file anything with the IRS on this or do I file some type of gift form?

IMO, you need not file anything. Your friend does need to file a gift return. I would await the opinion of others and you should also consult a tax professional

 

[troutette]

IMO, you need not file anything. Your friend does need to file a gift return. I would await the opinion of others and you should also consult a tax professional

Well, he died yesterday.

 

[justalayman]

then whomever prepares his taxes for last year has to file a gift tax form with the rest of his tax filings.