Tax on giving away personal property

[Slicer]

My parents died a couple years ago and one of the assets left to me was a car. If I want to give this car to my nephew will I have to pay a gift tax on it?

Now, I've already called my CPA and he said no, you don't have to pay tax on personal property given away. The reason I question him is:

1) Sounds like a "gift" to me and there's obviously gift taxes.

2) Talk with my CPA about the upcoming 2010 IRA -> ROTH conversion and it seemed like I knew more about the issues than he did.

Realistically, the car is a 2006 Impala and (at best) is worth $6k or $7k .. easily under the $12k gift tax.

Still, wondering about my CPA's advice.

[Broken Arrow]

As far as federal gift tax goes, a $6k to $7k car would fall well below the current $12k annual exclusion limit. So, I think you're free and clear. Any gifts above this limit, and doesn't qualify for any other exceptions, would then be taxable.

[creditcardfree]

Maybe you could sell it to your nephew for $1. Your nephew will need to show that he is the rightful owner when he goes to register the vehicle right? Just write up a bill of sale stating you sold the vehicle to him for $X dollars. A copy for him and for you. No federal gift tax required in my opinion.

[Snodog]

I think Broken Arrow is correct and your safe but if your still worried you could give him a gift of $6000 cash then let him buy the car for the same price. Course now he's paying a few hundred in sales tax.

[GrimJack]

Most states with sales taxes on cars will require either a sales tax on the value of the car or a 'user fee' on the value. They also will not accept a 'sale' that is far below market value (like $1.00) - that part of the transaction should be discussed with the state licensing dept. The state wants it cut from the transaction whether or not money exchanges hands. Here is the IRS take on gifts.

I just looked at TN gift tax rules and they exempt the first $3,000 - so you will probably have to look up your state and see how they feel about gifts versus sales. But it is not going to onerous though the giver is usually responsible for the gift tax and the receiver will need to prove sales tax was paid at licensing time.