Dollar value declared on glider bill-of-sale

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.

On Nov 18, 2:10*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.

Amateur legal advice:
If you knowingly file a false statement on a federal government form
in order to help someone defraud the IRS, you're opening yourself up
to a sea of troubles. There are lots of good gliders out there.
Your $28,000 canceled check is plenty of documentation for your own
capital gains basis. But then there is the matter of explaining to the
IRS agent investigating this guy why you signed a blatantly false
form.
John Cochrane

Why would the IRS care if you made or lost money on a glider 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

The FAA doesn't care what you paid for the glider. The language on the
bill of sale is just there to establish that there is a contract between
the parties (that there is consideration -- see
https://en.wikipedia.org/wiki/Consideration).

"$1000 and other good and valuable consideration" equals $28,000 or any
other value. It all depends on how you define "good and valuable
consideration." I think you will find a lot of FAA bills of sale use
similar language, and you are not committing fraud if you use this
language. This way you don't broadcast to the world what you paid. I
would bet you would see similar language on the bill of sale of most
corporate jets.

The IRS never looks at these forms, and doesn't care what they say. The
IRS knows that no one ever makes a capital gain on a depreciating asset
like an aircraft, so it won't be coming after anyone for capital gains tax.




-------- Original Message --------
Subject: Dollar value declared on glider bill-of-sale
Date: Sun, 18 Nov 2012 12:10:23 -0800 (PST)
From: son_of_flubber
Newsgroups: rec.aviation.soaring

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.

On Sunday, November 18, 2012 5:50:38 PM UTC-8, Greg Arnold wrote:
The FAA doesn't care what you paid for the glider. The language on the

bill of sale is just there to establish that there is a contract between

the parties (that there is consideration -- see

https://en.wikipedia.org/wiki/Consideration).



"$1000 and other good and valuable consideration" equals $28,000 or any

other value. It all depends on how you define "good and valuable

consideration." I think you will find a lot of FAA bills of sale use

similar language, and you are not committing fraud if you use this

language. This way you don't broadcast to the world what you paid. I

would bet you would see similar language on the bill of sale of most

corporate jets.



The IRS never looks at these forms, and doesn't care what they say. The

IRS knows that no one ever makes a capital gain on a depreciating asset

like an aircraft, so it won't be coming after anyone for capital gains tax.

On Sunday, November 18, 2012 6:49:53 PM UTC-8, Darryl Ramm wrote:
On Sunday, November 18, 2012 5:50:38 PM UTC-8, Greg Arnold wrote:

The FAA doesn't care what you paid for the glider. The language on the



bill of sale is just there to establish that there is a contract between



the parties (that there is consideration -- see



https://en.wikipedia.org/wiki/Consideration).







"$1000 and other good and valuable consideration" equals $28,000 or any



other value. It all depends on how you define "good and valuable



consideration." I think you will find a lot of FAA bills of sale use



similar language, and you are not committing fraud if you use this



language. This way you don't broadcast to the world what you paid. I



would bet you would see similar language on the bill of sale of most



corporate jets.







The IRS never looks at these forms, and doesn't care what they say. The



IRS knows that no one ever makes a capital gain on a depreciating asset



like an aircraft, so it won't be coming after anyone for capital gains tax.



















-------- Original Message --------



Subject: Dollar value declared on glider bill-of-sale



Date: Sun, 18 Nov 2012 12:10:23 -0800 (PST)



From: son_of_flubber



Newsgroups: rec.aviation.soaring







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.



Except in this case that the seller state he intends to use the bill of sale to avoid capital gains tax. That *is* fraud on his part. If he claimed and attached separate proof of the actual sale value on his tax return then he would be OK. If audited I would expect the "or any other value" to flag a concern with any auditor anyhow so it a pretty silly attempt either way. Bu to that extent it is his problem to deal with.



It's up to the tax payer to correctly report capital gains, but like I said, I don't expect the IRS to go trolling for aircraft capital gains but if you are audited for other reasons expect them to look at everything. I've been audited (ironically in this context) for a complex capital gains situation involving the sale of a company. They audited every last one of the shareholders involved. We were all squeaky clean on this transaction but they seemed to be looking at everything else on that return given their questions.



Darryl

And kudos to Greg who was really tying to get back to answering the original questions. At a minimum, just don't use the FAA bill of sale to establish your basis price, make sure you have a separate a legal contract of sale for the actual amount, copies of your check or money transfer etc. And use that in any of your tax returns, if the IRS every audits the other guy and approaches you for details of the transaction just state the actual value you purchased it for. It is his problem not yours.

Darryl

Darryl

I've bought a few planes over the years for "$1+OVC"

See, for example, http://www.aeroprice.com/aerolibrary/passingpapers.htm

Larry

On 11-18-2012 20:17, John Cochrane wrote:


Your $28,000 canceled check is plenty of documentation for your own
capital gains basis. But then there is the matter of explaining to the
IRS agent investigating this guy why you signed a blatantly false
form.
John Cochrane

Cash is king, baby! $1000 in Ben Franklins and about 9 ounces of gold
(non-bullion) "other valuable consideration".