USA Selling/trading gifted car Texas (taxes)

[Pinkangel]

Hi everyone,
I was gifted a car 6 months ago from a family member. We live in Texas.
The title has been transferred over to my name and I am trading the vehicle for another that is more appropriate for my new baby.

Selling vehicle for: $24,500
Vehicle I’m trading for costs: $15,000
Getting a check for difference: $9,176.99 (after fees etc)


I just found a receipt that my family member originally paid only $21,399 for the gifted vehicle so I am selling it for more. He bought it from a friend’s dealership and received a deal/discount.

I’ve barely put any miles on the vehicle and KBB normal trade value is around 24,000-26,000 right now for this type of car. So it seems like what I’m selling it for is fair and appropriate for the current market.

I would like an expert opinion- do I owe taxes on this transaction? I am selling for more than my family member originally paid BUT it is a fair trade price and he had bought it at a very low price from his friend.

Also- I am not employed and haven’t filed income taxes in a few years due to pregnancy and caring for baby so I don’t usually deal with taxes as of lately.

What should I do?

 

[BIG E]

It doesn't matter what price your relative bought it for.
What is important is that the car is valued at the lower of cost or FMV on the date the gift was made to you.
Your relative should be filing a gift tax return to disclose the value of gift given to you since it could be valued
at more than the annual exclusion of $ 15,000.
So the FMV on date of transfer to you is your starting cost basis.
If the trade-in value you are getting for the new car is more than your FMV cost basis, then you have a taxable gain.