Vehicle purchase audit question
Hi guys, I recently got a letter from the ministry of finance and my friend recommended that I come here to get some advice from you guys. I'm sorry if this is the wrong place to post, but any help is much appreciated!
Last summer, I was riding my Ninja 250 when my uncle said that I could ride his old Ducati 748, but it required me to work on it to get it into running shape. We went to the insurance office to do the transfer but the worker there informed us that you could no longer gift vehicles between uncle and nephew. He recommended us to do a "sale" for $100 and pay the tax on that. We did it, and then I transferred my insurance from my Ninja to the Ducati and we went home.
The reality is that after I transferred the bike, after the first ride, I realized that getting the bike up to running condition was not going to be as easy as we thought (my bad, I should have confirmed it was working 100% before doing the transfer but I was excited to get to work on Italian machinery). My uncle had bought the bike used and had no history of its maintenance. I attempted to perform as much of the maintenance as I could myself but I could never get the bike to run without stalling every time I idled. I eventually had to bring the bike in to a shop, get over $2000 in work done, and it still doesn't work well enough to be reliable. I ended up not having enough time to learn about the bike and fix it up and when school started again, I cancelled my insurance early because there was no way I could get it done.
Just this week, I got a letter saying that I had purchased my vehicle for below the fair market value and are now asking me to pay taxes on the vehicle at their "average retail value." Now I understand that taxes are important for the operation of our country, but I think this is a little ridiculous. The vehicle has had some much work and money poured into it and it still doesn't work. It says that I can provide paperwork to support adjustment of fair value, so I guess I'm asking you guys if you've ever ran into this, and when I email the person who sent me this letter, should I even bother to mention that it was a transfer from a family member, or do I just send him scanned copies of the work done, and explain how the bike still doesn't run?
Also, it says to complete the audit, I must provide:
-Bill of sale or purchase agreement
-transfer tax form
-proof of payment
I only have a transfer tax form, since it wasn't really a sale. Does this mean I can't complete the audit?
Thanks in advance guys, I really appreciate it.