Buying a car vs. getting it as gift?

I swear that when I was in high school, my friend bought her grandparents car for $1 instead of having them just out and out give it to her because of tax issues. i don't remember specifics.

The in laws are buying a new car and are giving us their old one. I mentioned us buying it, but everyone thinks I am crazy and its no big deal for them to just give it to us.

Am I crazy or should we have them actually sell it to us?

Re: Buying a car vs. getting it as gift?

Yeah, If Im not wrong they can tax your inlaws for the car. What you can do is just put in the transfer papers that yo bought the car like for $300

Re: Buying a car vs. getting it as gift?

The DMV is going to tax you on the book value (or off a bill of sale close to book value) regardless of what you are actually buying the car for.

There are exemptions for family but I believe they have to be immediate family gifts. Like parent to child. Brother to sister. I don't know if grandparents or aunts or cousins qualify.

Re: Buying a car vs. getting it as gift?

I did this. My sis gave me a car. We wrote up a bill of sale for $100. I payed tax on the $100.

Eta: I'm pretty sure that if the car is worth over a certain amount (not sure of the amount) and it is a gift you have to declare the value on your income taxes

Message edited 11/28/2011 7:43:42 PM.

Re: Buying a car vs. getting it as gift?

Here is the DMV form for claiming a car as a gift