My car got totaled by my insurance company and I will get a check for about $8500. I plan to give that my money to my sister and take her car. My sister plans to buy a new car with that amount as a down payment.
Will the money I get from the insurance company be taxable? What is the best way in regards to taxes to give this money to my sister and she paying it to the dealership? What should I and my sister mention about this in the taxes?
I think I have the following options
- Cash the check and give the money to my sister and she pays the cash to the dealership. - Is this a fine option and will the dealership accept cash?
- Deposit the check, then write a check to my sister and she write a check to the dealership. - This process looks like the right one to me but takes some time and she plans to buy it soon
- I have taken around 3500$ from my sister over the years for personal expenses. Should I give the money as repaying that amount and my sister give me her car a a gift as mentioned here so that it is tax exempt?
Please let me know if there are other better options than the ones mentioned above.