Social Question

Hypocrisy_Central's avatar

You give a 16yr old a #360,000 auto does it count as capital gain and do the kid have to file taxes?

Asked by Hypocrisy_Central (21481 points ) June 14th, 2010

If you give your 16yr old a $360,000 car does it mean he has to file income tax and have the value of the car count as income or capital gains? Would he be able to drive it to school considering the commotion and target the car will have on it? What if the kid speeding around causes someone to hit him or he totals the car, would the person he caused to hit him get their insurance cancelled because of the cost of the repairs? What do you think the yearly cost of insurance on that value of car with a fresh teen driver will be?

Observing members: 0 Composing members: 0

24 Answers

YARNLADY's avatar

I doubt that a minor can own a car outright, so the parent would be responsible.

perspicacious's avatar

The parent bought the car; there is no tax liability for the parent. Parental gifts to their minor children are generally not subject to income tax liability for the child. Whether such a substantial gift may be subject to gift taxes (death tax) is something I would need to look up. But, you can do that. This is not legal advice; just my personal opinion.

PandoraBoxx's avatar

Never mind—misread the question.

DrBill's avatar

A person cannot own anything until they are 18.

At 18, the receiver would be liable for taxes over the Gift tax limit.

perspicacious's avatar

@DrBill Are you a CPA or tax professional? I’m wondering exactly what you mean in your answer. Are you talking about a gift tax that will become due and payable by the giftee on the 1040 in the year of the 18th birthday, or are you talking about gift tax being due from the estate when the grantor dies (that above the limit that is in place the year of death)? (I slid right through the tax classes in law school—I hate this stuff):) Thanks

DrBill's avatar

Yes, I am refering to the 1040, but also it is not legal for a minor to hold or own property (except in case of an emansapated minor)

john65pennington's avatar

First, what parent would ever give a 16 year old a $360,000 automobile? i can just see it being totaled out the very first day. this reminds me of the parents of Abby Sunderland giving her permission to sail the open ocean. both qualify for America’s Most Stupid. 18 is the legal age limit to own anything. the parents of the vehicle are responsible.

perspicacious's avatar

@DrBill I The laws about contracting and ownership by minors differ in the states. Thanks for clarifying the tax matter.

dpworkin's avatar

You owe gift taxes.

zenele's avatar

Emancipated.

GRAMMAR MAN TO THE RESCUE.

CMaz's avatar

Gifts over 12,500 are taxable. Do you think the IRS is stupid?

Giving any family member a $360,000 car is silly. Because of the taxes you/they would have to pay. Would be cheaper to “lend” them the car, adding them to the insurance.

“18 is the legal age limit to own anything.”

So a Hollywood actor (under the age of 18) that makes a million dollars need to have an executor?

Zaku's avatar

So the parent pays the taxes on the money earned so that they have $360K to spend. Then they be generous to someone, and the IRS wants to tax that person.

Generally people tend to wrongly accuse me of being a communist when I talk about financial issues. But in this case, I think it’s just unfair robbery by the government, the way this works. Bad system.

dpworkin's avatar

It’s to prevent the redistribution of wealth to family members to dodge estate taxes.

Zaku's avatar

It’s an interesting social dilemma. Probably impossible to solve to everyone’s satisfaction when the nation has so many opposed viewpoints.

Seaofclouds's avatar

I think the ability to actually own a car may vary from state to state. I bought my first car when I was 16 and it was licensed and tagged in my name. It was a used car and I paid cash for it, so there wasn’t any financing contract to be signed. I also had my own insurance policy because my mom didn’t want to add me to hers because of the cost.

Hypocrisy_Central's avatar

@ChazMaz Maybe the poor kid could not get laid so he has to have a babe magnet to attract a bunch of chicken heads to fake fawn all over him and spread their legs (maybe in the back seat so they really have a tale to tell)

CMaz's avatar

Don’t need a $360,000 car for that. A high priced hooker will do the job for less.

zenele's avatar

About $359,000 less. Just saying.

YARNLADY's avatar

@Seaofclouds The thing about ownership of anything while still a minor is that you have the right to repudiate any contract you may have signed. That’s why many businesses won’t do business with minors.

My sister bought a set of expensive glassware when she was 17, and signed a contract to make payments over a two year period. She simply disclaimed the contract before she turned 18 and kept the glasses.

Many minors used to join record/disc clubs received 10 or 12 discs and then refuse to pay. There was no way the club could force them to honor their contract.

Seaofclouds's avatar

@YARNLADY Yeah, that’s why I specifically mentioned that it was a used car and I paid cash for it. There wasn’t any contract to sign. I also bought it from a private seller and not a dealership.

I completely understand why 16-year-olds can’t enter into contracts, my point was that if there is no financial contract for purchasing the car, some state will allow 16-year-olds to register and title the car in only their name.

Hypocrisy_Central's avatar

@Seaofclouds If a 16yr old kid gets a $360,000, a $470,000 yacht, or a 3 mil dollar Lear jet as a gift if it is in the name of the youngster don’t it count as assets or something taxable? There is no way on God’s green Earth I can see no one paying a dime of tax on that other than sales tax.

Seaofclouds's avatar

@Hypocrisy_Central I imagine that if a 16-year-old’s parents are buying them such lavish gifts, they would also be covering the taxes (that’s my guess). Taxes for vehicles are paid upon registration in the states I’ve lived in. So whoever pays to get it registered would be paying for that. I don’t remember seeing a spot on my tax forms where I had to put down that I was given expensive gifts before so I don’t think it’s something the kid would have to claim on their income taxes (unless I’ve missed it). I’ve never been given anything that expensive though so I’ve never had to really look for it.

CMaz's avatar

If you have that type of wealth. You usually have a corporation.
Giving family members a company car to drive.

Answer this question

Login

or

Join

to answer.
Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
or
Knowledge Networking @ Fluther