Chapter 4, Problem 11DQ

Wade paid $7,000 for an automobile that needed substantial repairs. He worked nights and weekends to restore the car and spent $2,400 on parts for it. He knows that he can sell the car for $13,000, but he is very wealthy and does not need the money. On the other hand, his daughter, who has very little income, needs money to make the down payment on a house.

1. a. Would it matter, after taxes, whether Wade sells the car and gives the money to his daughter or whether he gives the car to his daughter and she sells it for $13,000? Explain.
2. b. Assume that Wade gave the car to his daughter after he had arranged for another person to buy it from his daughter. The daughter then transferred the car to the buyer and received $13,000. Who is taxed on the gain?