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Posted by Stuart Bronstein on January 3, 2008, 9:39 am
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William Brenner wrote:
> A married couple purchase a new automobile and decide
> to gift their old one to their child.
>
> The older vehicle, which originally cost $45,000, has
> a FMV of $20,000 and is titled in the name of only one
> parent.
>
> Must the parents go through the bother of having the
> auto re-titled in both names in order to make the gift
> jointly, thus avoiding having to report it?
The answer is different depending on whether we're talking about a
community property state. If it is community property, it's considered
a gift half from each parent and no gift tax return is required. In
non-community states the result is the same if the funds can somehow be
traced back to having belonged to both parents equally.
In non-community states, there is still no reason to re-title the car
before transferring it to the child. If the car in fact belongs to one
of the parents and its value is higher than the annual gift tax
exemption, both parents can file a gift tax return and elect that the
gift be split - in other words treated as having been given half by
each. But to do that the return is required.
Technically re-titling the property would not accomplish the goal
without a gift tax return, because it is considered a step-transaction.
If it is done for the purpose of effecting the transfer to the child,
it is ignored for gift tax purposes.
Stu
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