Buying a used car for $1, and use tax in California (vehicle, mileage)

[zanthal]

My sister is gifting me her old car. We do qualify for a family member transfer of ownership, here's some of the policy details from the DMV's website:

You can see that the Use Tax is exempt for ALL family member transfers EXCEPT between siblings who are not minors ... neither my sister or I are a minor.

I'm wondering, what would be better? To just pay the Use Tax, and get to avoid having to re-smog the vehicle, or buy it for $1.

I'm from understanding all of the dynamics and which would be better, and I'm hoping someone who is could share their knowledge and experience ... thanks!


-----------------------------------------------------------------------------------------------------------------
Are Transfer Requirements Different Between Family Members?

Yes. This information outlines the differences between a regular transfer and a family member transfer.

What Is a Family Member Transfer?

A "family transfer" is when ownership is transferred to or from a:

spouse
parent
child
grandparent
grandchild
siblings
domestic partner
How Is a Family Member Transfer Different from a Regular Transfer?

There are three primary differences between regular transfers and family member transfers:

1. A regular transfer requires smog certification in most cases before the vehicle can be registered in the new owner's name. A family member transfer does not require smog certification (See Smog Certification section) if the vehicle is currently registered and the biennial smog inspection is not due.

2. On a regular transfer, use tax based on the purchase price of the vehicle is due at the time of transfer. A family transfer is exempt from use tax with the exception of a transfer between siblings who are not minors. Transfers between siblings are exempt from smog certification regardless of age, unless a biennial smog is required.

3. A regular transfer requires the department to reestablish the vehicle value (reclassify) to determine the appropriate Vehicle License Fee due. The license fee is based on the purchase price or current market value of the vehicle. A transfer between family members is exempt from reclassification of the vehicle value.

To establish eligibility for the use tax or reclassification exemption, be sure to let the department know that this is a family member transfer.

What Do I Need to Do for a Family Transfer?

The DMV will require:

The California Certificate of Title properly signed or endorsed on Line 1 by the registered owner(s) shown on the title. You will need to complete the new owner information on the back of the title and sign it.
A Statement of Facts (REG 256) for use tax and smog exemption, if applicable.
Transfer fee.
Odometer disclosure for vehicles less than 10 years old. Refer to Odometer Mileage Reporting.
Additional fees, such as registration fees, may also be due.
-----------------------------------------------------------------------------------------------------------------

[Electrician4you]

Just do a gift since its family members, You shouldn't have to pay anything more than a transfer fee and maybe the registration if it's within two months of being due. The $1 thing won't fly.

[jaypee]

Originally Posted by Electrician4you

Just do a gift since its family members, You shouldn't have to pay anything more than a transfer fee and maybe the registration if it's within two months of being due. The $1 thing won't fly.

Agree. If the Fair Market Value of the car is less than $14k, the person giving you the car won't have to pay any gift tax.

Don't do the $1 deal. That's a red flag.

[zanthal]

Alright, thanks for the advice.