Dollar value declared on glider bill-of-sale

On 11/18/2012 12:10 PM, son_of_flubber wrote:
I'm buying a glider and the seller wants to declare the price paid as
"$1000 and other good and valuable consideration". The actual sale
price is $28,000. The seller wants to do this because when he bought
the glider years ago he used the "$1000 and other good and valuable
consideration" phrase on the previous bill of sale filed with the
FAA. He doesn't want to declare the actual sales price on the FAA
form and then have the IRS come after him for a capital gains tax.
The seller can only see things his way because "this is the way that
he has always done it."

My question is: if I go along with the seller's white lie, will I pay
the price down the road when I sell the glider for say $25,000? Will
the IRS come after me for a $24K capital gain?

Does the FAA automatically share the bill of sale value with the IRS?
I live in a state with no aircraft registration fee/tax so there is
no declaration of the value of the glider to my state.

The FAA bill of sale form does not require my signature, so it is
only the seller that is going on record and misrepresenting the
price.

I have some other documentation that establishes the price of
purchase at $28,000 so should I show that to the FAA at this time?
Or should I wait until a potential problem comes up years down the
road.

I've made money on three glider sales, but no government official has
inquired about it. I suspect it's not a problem unless it's a business
transaction, instead of a personal sale.

I am curious about what happens if you subsequently sell it to a person
from my state (Washington), that does have a sales/use tax and aircraft
registration fees and requirements. Will the state be asking you some
questions? Can they do anything, since you aren't a resident?

--
Eric Greenwell - Washington State, USA (change ".netto" to ".us" to
email me)

On Sunday, November 18, 2012 1:23:33 PM UTC-8, Eric Greenwell wrote:
On 11/18/2012 12:10 PM, son_of_flubber wrote:

I'm buying a glider and the seller wants to declare the price paid as

"$1000 and other good and valuable consideration". The actual sale

price is $28,000. The seller wants to do this because when he bought

the glider years ago he used the "$1000 and other good and valuable

consideration" phrase on the previous bill of sale filed with the

FAA. He doesn't want to declare the actual sales price on the FAA

form and then have the IRS come after him for a capital gains tax.

The seller can only see things his way because "this is the way that

he has always done it."



My question is: if I go along with the seller's white lie, will I pay

the price down the road when I sell the glider for say $25,000? Will

the IRS come after me for a $24K capital gain?



Does the FAA automatically share the bill of sale value with the IRS?

I live in a state with no aircraft registration fee/tax so there is

no declaration of the value of the glider to my state.



The FAA bill of sale form does not require my signature, so it is

only the seller that is going on record and misrepresenting the

price.



I have some other documentation that establishes the price of

purchase at $28,000 so should I show that to the FAA at this time?

Or should I wait until a potential problem comes up years down the

road.



I've made money on three glider sales, but no government official has

inquired about it. I suspect it's not a problem unless it's a business

transaction, instead of a personal sale.



I am curious about what happens if you subsequently sell it to a person

from my state (Washington), that does have a sales/use tax and aircraft

registration fees and requirements. Will the state be asking you some

questions? Can they do anything, since you aren't a resident?



--

Eric Greenwell - Washington State, USA (change ".netto" to ".us" to

email me)

Ah no. You are required to report to the IRS all gains from sales of capital assets, whether is is business or private. And an aircraft is certainly a capital asset.

For a start see http://www.irs.gov/uac/Ten-Important...ins-and-Losses

Your accountant ought to be asking you "tell me everything significant you brought or sold this last year" and if sold he should be looking for the basis cost, whether its short/long period gain, and all the supporting documentation. If you do your own taxes, well you should have a talk with yourself.

These kinds of things might be an issue in an IRA audit, while they may not trigger an audit themselves once you are being audited expect everything to get looked at.

State laws are a whole other thing, if attempting to commit fraud and avoid state sales/use tax you are exposing yourself to significant risk there as well.

---

I agree with John. None of this is worth doing, and its just dishonest. And if a seller is asking you to commit fraud. You might want to consider how honest they have been about other aspects of the glider or the sale.

Darryl