Do you have to pay tax when you sell a gifted car?
<p>Assume someone gets a used car as a gift that has a value under $10K. Now, a short time later, he wants to resell it.</p>
<p>Does the law oblige him to pay any taxes arising from the sale? If so, how much? Assume he can sell the car for exactly $10K for ease of calculation.</p>

<p>A capital gains tax is due on the sale, if the sale price for the car is more than the adjusted basis of the car for the person who made the gift of the car.</p>
<p>If a car had been owned by the donor as non-business property and not depreciated, and there are no major upgrades to the car (e.g. trading a V6 for a V8 engine), the adjusted basis of the car will normally be the cash price for which the donor bought it (assuming that the donor bought it for cash at arms-length).</p>
<p>If the donor bought the car new, the sale of the car for $10,000 will almost surely be less than the purchase price that the donor paid. But if the donor bought the car used for less than $10,000, then there would be some capital gain on the sale which would be reported as part of one's California and United States income taxes in the year of the sale by the gift recipient. The exact rate due would depend upon the seller's tax brackets, which would also be based on other income.</p>
<p>In addition, there would probably be California DMV charges for a new license and registration, which could be characterized as a tax, but which are normally paid by the purchaser, along with sales tax.</p>

california tax-law vehicle gift