D purchased a used car for $4,000 from Junior’s Used Cars. The fair market value of...
- D purchased a used car for $4,000 from Junior’s Used Cars. The
fair market value of the car was only $2,500.
- Has D made a gift of $1,500 to Junior?
-
- Would the result be different if D and Junior were relatives?
Homework Answers
D purchased a used car for $4,000 from Junior’s Used Cars. The fair market value of the car was only $2,500.
If any moveable property is received without consideration or received at consideration less than fair maket value, then it is considered as a gift.
If a gift is received from a relative, then it is tax exempt.
a. A person receiving a car at less than fair market value is termed as gift. But, in this case, D has paid more than fair maket value. Hence, D has not made a gift of $1,500 to Junior.
b. Result would be same even if D and junior were relatives because the car is not received less than fair market value, rather D has paid more than fair maket value.
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