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I was in almost the same situation as you. Except the car I bought was a leased car and had body damage and would be too expensive to fix and return, so the owner (company) sold to me at buyout price. I got this letter and they wanted the taxes owning since it was under market value. We took pictures of the damage and sent it in and it was approved. I would do what Hehe said and try, you got nothing to loose at this point.
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