I’m not sure if this is the appropriate place for this question so I offer my apologies to the mods in advance…
Here’s my question but a little background first …
Several years back, a friend was unable to get a loan to purchase a horse trailer. We made the deal where I would purchase the trailer with the loan in my name and my friend would pay all the notes…
The loan is paid in full and I’ve received the title in the mail. As I was filling out the back, I came to the blank where I’m instructed to enter in a selling price OR if the trailer is a gift, enter zero.
Well, neither of those fit the situation. really. My question is … what would be the best way to fill this out??? I’m in California, by the way. Not sure if that makes any difference…
By completing the title are you formally taking title to the trailer, or attempting to transfer title to your friend? Also, does California consider title transfer as a taxable transaction? If so, at the market rate? Does a gift designation require fair market value?
Really and truly, you own it and you’re giving it to him for free, it would be correct and on the up and up to write $0 in that spot. Any number you put there, you’ll be charged sales tax on (at least where I live).
If asked (and only if asked), I would just say ‘I gave it to him, I didn’t sell it’. You aren’t the first person to A)give someone a vehicle without money changing hands and B)be in your exact situation.
Also, as I’m reading the OP more carefully, it says ‘if it’s a gift, enter zero’, he might have to pay a gift tax on it, but it still works with the fact that no money changed hands and it probably is a gift, technically (but I don’t know).
TL;DR, IMVHO, put zero, it’s what he paid you for it.
If you’re a AAA member, they offer basic DMV services and you can ask there, without the hassle of going to a DMV. But, I must admit, the DMV has greatly improved their services in the last few years and the experience is much MUCH better than it was in the 80s and 90s. So you can also go to a DMV and ask.
Thanks everyone for your replies. I’ll just enter it as a gift and value it as $0 dollars. No money is changing hands since he paid every single loan note… It’s his trailer except for the legal paperwork with the bank and the DMV… The options are limited on the back of the title and I guess it is an unusual situation. They can’t address everything…
I don’t know about California, but in Indiana, if you enter zero, he will be charged gift tax on the full value of the trailer. In Indiana, there is a minimum amount you have to pay for a vehicle (when my cousin gave me a car, it was $50) in order not to be charged gift tax for it. I don’t know whether you have to dummy up a receipt, of have him write you a check, which you will then cash and return to him, or if it’s enough just to write the amount on the title.
I would check with the DMV or a lawyer.
But since the loan was in your name, you own it, legally.
It looks like the recipient will be charged registration fees based on market value, but will be able to dodge the use tax component of the regular sale process.
My analysis is that it’s not a gift. Your friend paid for it by paying off the loan: that’s effectively a payment to you, since it reduced the amount that you owed on the loan. The price of the trailer was the total payments on the loan.
Captain Amazing, I meant unusual that they can’t address every possible ownership transfer situation on the back of a title.
Giles, my friend paid for the entire trailer, not just the payoff amount. He paid every single note from the beginning so it’s his, really except for the legal paperwork of signing it over to him now that I have the title. That was my point of the question. It’s NOT a gift since he paid for it but the title is still in my name when the loan was paid off. But I’m given two choices on the title… I wasn’t sure about the best way to fill out the ownership transfer part since no money changed hands except from him to the bank.
I think the gift option is our best bet and we’ll go from there… Thanks again…
What is the value of the trailer? I live in California and had a similar situation with a car I gifted to a family member. The family member had to pay gift tax on current market value minus the $12,000 gift tax exemption (this was several years ago and I think the gift tax was increased to $14k)