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So if you win a car as part of a contest you have to pay income tax on the ARV (approx retail value) of the car. You get a 1099-MISC to assist you with that.

So what happens if you turn around and sell the car? Do you have to pay additional income tax on the money you got for selling the car?

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You receive a 1099-misc for the value of the car. You claim that as income (even though you received goods rather than cash). When you sell the car, it would be much like selling any posession, and would cause no tax consequence unless the sale price was much different than the value...

When you sell the car, you may have received more or less than the value of the car (likely less). If you sold it for more, then you might need to claim the additional money as income (perhaps short term capital gains). If you sold it for less, but to a friend or relative, then you might think you could claim a loss, but the tax collector would just claim that you had given them a gift, and attempt to collect the tax from them.

Contest winners often have the frustration that they are taxed at the full value of the item(s) won, even though they would not value the item at that amount. And contest prizes often do not sell for the full value stated on the 1099, and often for much less. Marginal tax rates were higher prior to Reagan, and when a contest winner would sell an item for 80% of the value, they often paid most of the proceeds to taxes.

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    Even if the IRS considered the transfer to a friend/relative as a gift; The tax issue is with the giver not the receiver. The giver, if the amount of the gift was over 14,000 would have to file gift tax form. The receiver of the gift would have to do nothing. Remember a few year back talk show audience members who were given a car as a prize wanted to claim it as a gift, because they did nothing to earn it. If it is a gift their tax is zero. Also if a spouse pair gave another spouse pair a combined gift the annual limit to avoid the form is 56,000. – mhoran_psprep May 9 '15 at 10:40
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If the income is more than the value on the 1099-MISC - then yes. Depending on how long you've held the car, the difference would be short term/long term capital gain.

You cannot deduct loss, though, since it is a personal property and not investment.

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