Question

10. LO.3,5 Wade paid $7,000 for an automobile that needed substantial repairs. He worked nights and weekends to restore the car and spent $2,400 on parts for it. He knows that he can sell the car for $13,000, but he is very wealthy and does not need the money. On the other hand, his daughter, who has very little income, needs money to make the down payment on a house. Would it matter, after taxes, whether Wade sells the car and gives the money to his daughter or whether he gives the car to his daughter and she sells it for $13,000? Explain b. Assume that Wade gave the car to his daughter after he had arranged for another person to buy it from his daughter The daughter then transferred the car to the buyer and received $13,000. Who is taxed on the gain? a

Answer 1

Answer :- Pool Tax Treatment => w paide $7,000 for an automobile. He spends $ 2,400 on parts. Current market value of Car $ 13,000. is Particulars Amount ($) 13,000 Selling Price of cool les: purchase price 7,000 2,400 less: Repairing Gain on Car 3,600 give money to his -If w sells Car and daughter than Capital gain of $3,600 would attract tar in the hands of we only further there is no relevance that what w had done With that money,

P.2 If w gives this car to his daughter and she will Sell this Car then $3,600 Capital gain would attract tax in the hands of his daughter only. b) * It is assumed that Car will be gifted to daughter by w, and his daughter sells Same for $13,000 then she will be liable to tare on Capital gain of $3,600. * If W is comes in higher fare bracket then he has to definitely transfer car to her daughter's So that tare liability would become low. This gift Concept is better for name fare planning . please, ... plean. Kindly an upuote ..