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1099 from car sale

Forum|Forum|6 years ago
January 8, 2020
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We bought a car for $1 from my in-laws. We had to sell it and took it to a dealership. We received market value. Will we need to pay capital gains tax and will we receive a 1099 from the dealership?

Best answer by Anonymous_

@Daspang70 wrote:

We bought a car for $1 from my in-laws. We had to sell it and took it to a dealership. We received market value. Will we need to pay capital gains tax and will we receive a 1099 from the dealership?

Whether or not you receive a 1099-MISC from the dealership depends upon the dealership, but 1099s are not required to be issued for payments for merchandise (which is what the car is in the hands of the dealership).

Typically, you would have a capital gain if you sold the car for more than you paid for it. In this instance, the difference between the sales price and your basis of $1 would be capital gain.

However, $1, paid to a close relative or friend, for a car worth hundreds or thousands of dollars would be considered nominal consideration and more on the order of a gift. As a gift, you would take the basis of your in-laws which is almost certainly a much higher dollar amount than what you received from the dealership. Therefore, you would have no gain and, in fact, probably a loss (which you cannot deduct because the car is personal use property).

A

Anonymous_Answer

Employee

@Daspang70 wrote:

We bought a car for $1 from my in-laws. We had to sell it and took it to a dealership. We received market value. Will we need to pay capital gains tax and will we receive a 1099 from the dealership?

Whether or not you receive a 1099-MISC from the dealership depends upon the dealership, but 1099s are not required to be issued for payments for merchandise (which is what the car is in the hands of the dealership).

Typically, you would have a capital gain if you sold the car for more than you paid for it. In this instance, the difference between the sales price and your basis of $1 would be capital gain.

However, $1, paid to a close relative or friend, for a car worth hundreds or thousands of dollars would be considered nominal consideration and more on the order of a gift. As a gift, you would take the basis of your in-laws which is almost certainly a much higher dollar amount than what you received from the dealership. Therefore, you would have no gain and, in fact, probably a loss (which you cannot deduct because the car is personal use property).