Question

Taxes on car buy back by the car company

Forum|Forum|5 years ago
May 10, 2021
1 reply
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Hi,

My car had a problem that the company was not able to fix after repeated attempts. Hence, they ended up buying the car back from me and cleared the rest of the loan amount I owe. In this situation, should I be paying any tax on this money. I paid around ~33K in down payment and in EMI payments (it was financed) for the car. They paid me back ~26K saying

AMOUNT ATTRIBUTABLE TO USE BY CUSTOMER BEFORE CUSTOMER FIRST
DELIVERED THE VEHICLE FOR CORRECTION OF THE PROBLEM THAT GAVE
RISE TO THE CLAIMED DEFECT: 7K

Should I be paying any taxes on this?

If yes, how should I calculate the gain?

I found some posts explaining lemon law in California and people won money in a law suit. I believe my case is different from that, as it is acknowledged as problem by the car company and statement they made above.

Not A Product Question

T

ThomasM125

If you made money on the transaction, then you should report is as investment income your your tax return. If you lost money, it is not deductible and you don't report it on your tax return.

It looks like you paid $33,000 and received $26,000, so that would represent a net loss, so it wouldn't be reportable under that circumstance.

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