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Well, your right in understanding that anything sold at a profit from your tax basis would create gain income, including a car or such. And I'm sure all of us are alert to, and report that faithfully.

It's complicated by the fact most people may not track their basis (especially tax basis) on items of personal property. But, as your question acknowledges the acquisition was done as a qualified gift, (presumably by parents or such), virtually all of those transfers include the recipient getting a "stepped up basis", that is the basis at market value at time of transfer to you. That is presumably higher (as the car is worth lesds now) than the amount your selling it for. Hence, no income. (In fact a loss on sale of a personal asset, which cannot be used).

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Q: Is profit from the sale of a tax-free car - gifted originally for one dollar - taxable as income?
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