Immediately buying from a friend

[gschom]

My friend has a Lightning currently in production that he no longer wants. We’re aware that reservations aren’t transferable, so we’ve been scratching our heads as to how he can pick up the truck at the dealer, and I pay him for it without us being doubly taxed. (Once for him when he purchases it from the dealer and once for me when I transfer the temporary registration to my name).

Has anyone dealt with a similar scenario before that could provide some guidance? It feels like there has to be a simpler way. The truck will be purchased from a Connecticut dealer if that’s important info.

Thanks in advance.

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[PA Lightning]

One option may be to put both of your names on the original title, and then have him remove his.

That way the dealer shows the vehicle being titled in the reservation holders name.

I would check with the dmv to make sure there are not pitfalls if you elect this option

 

[FlasherZ]

The dealer can do this without putting both names on the title. The problem you have is that most dealers see dollar signs and will tell you "nope, nope, nope, can't transfer, you'll have to just give it up [so I can put $35k of ADM on it and sell it to some other sucker]". If you trust the dealer or know someone there, you can probably sit down with them and work something out.

Otherwise, yeah, you're pretty much limited to the two-names-on-the-title thing, and you should back it up with a contract between you and your friend so he can't take it and sell it out from under you. Just a note explaining the arrangement - who gets the tax credit, intention to take his name off it, he can't sell it without a notarized, written statement from you, etc.

 

[PA Lightning]

I forgot to add, the two name on the title idea will not work if you are financing with a lien on the title.

 

[gschom]

Thanks for the replies and suggestions.

The ADM being tacked on is our biggest concern with just going to the dealer and trying to work this out. Right now there is none, but I’m skeptical it would remain that way.

The two names on a title idea is a good one. My friend and I are very close so there wouldn’t be any funny business between us at least.

If I’m understanding correctly, the 2 name idea would allow either of us to register the truck without any transfer of ownership and therefore only pay the sales tax once when purchasing from the dealer, right?

 

[gschom]

I forgot to add, the two name on the title idea will not work if you are financing with a lien on the title.

Thanks for calling this out. I’d be providing my friend with the cash to purchase the truck in full.

 

[F150ROD]

Or your friend can lease it and then you buy it from him the next day? I guess it depends if they include all taxes at once or they do it on a monthly basis….

Also I believe Ford might have stopped buyouts for leases, I’m not sure…

 

[rdr854]

Ford has eliminated lease buyouts in several states. Also, OP will need to check with his states Dept of Motor Vehicles to see if there are transfer fees and sales taxes if one Joint Owner buys out the other. The best solution may be for OP to buy the truck and for his buddy to just pay the sales tax on a resale. It is not worth running afoul of the state licensing and tax authorities.

In Virginia, each son had to pay the full sales tax on the car since they were purchasing the car from me. Of course Dad handled the tax, but Virginia still got its money.

 

[FlasherZ]

If I’m understanding correctly, the 2 name idea would allow either of us to register the truck without any transfer of ownership and therefore only pay the sales tax once when purchasing from the dealer, right?

This is likely to be different depending upon your state.

In Illinois, the initial title and registration are one and the same - so your registration would be in both names as well.

Many states charge sales tax on ANY title changes, with some exceptions for divorce orders, business disolutions, etc. You'll have to look at your specific state.

 

[RickLightning]

There is no legal way to do this, without paying sales tax a second time.

Putting two different names on the title has legal consequences that you should make sure you understand. If you had the truck, with his name on the title, and something happened, he would be legally and financially liable just like any other vehicle owner would be.

If I were the dealer, if your friend doesn't want the truck, there are 180,000 people in line in front of you. He shouldn't sell it to you even with ADM.

 

[knot_another_won]

I do not recommend engaging in fraud or any other law-breaking act, but if your friend treats the cash you are giving them as a "gift" which they choose to use on the truck and then turns around and sells the truck to you for $1, you would only have to pay tax on the sale price (the $1), right?

Note: I am not an accountant or tax professional and my advice should be taken with a large grain of salt.

 

[Tony Burgh]

I do not recommend engaging in fraud or any other law-breaking act, but if your friend treats the cash you are giving them as a "gift" which they choose to use on the truck and then turns around and sells the truck to you for $1, you would only have to pay tax on the sale price (the $1), right?

Note: I am not an accountant or tax professional and my advice should be taken with a large grain of salt.

Good luck with that. I’ve moved vehicles to family members for $1 but needed a notarized form stating familial relationship. At least that’s how it works in PA.

 

[metroshot]

Not knowing if CT charges lease tax on monthly vs. entire amount; if monthly, the best way is get a 3rd party lease company like Ally or US Bank.

Then have your friend buy out the lease.

 

[rdr854]

I do not recommend engaging in fraud or any other law-breaking act, but if your friend treats the cash you are giving them as a "gift" which they choose to use on the truck and then turns around and sells the truck to you for $1, you would only have to pay tax on the sale price (the $1), right?

Note: I am not an accountant or tax professional and my advice should be taken with a large grain of salt.

That might trigger gift tax and transactions above $10K are tracked. The feds also track series of transactions that may appear to be structured to avoid the $10K reporting requirement. I recommend that you consult an attorney to see if there are any legal work arounds. Otherwise, you or your friend or both could end up with much bigger problems than just the sales tax and potential ADM.

Also, you both will need to consult a tax attorney regarding the EV tax credit in order to determine if it will be available in your circumstance, and if so, which one of you would qualify for it.

 

[gschom]

Good luck with that. I’ve moved vehicles to family members for $1 but needed a notarized form stating familial relationship. At least that’s how it works in PA.

I believe this is also the way it works in CT. But kudos for thinking outside of the box!

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