I've done that before when I lived in CA. Usually for something like
$165 or some odd amount. That keeps all the fees realy low for the buyer
and doesn't cost the seller anything when transfering the title. There
are no tax issues for either of you that I know of unless you're
transfering an obviously expensive car that he sells right away for a
profit. Giving a 1982 Cutlass w/ 165k on the clock to someone for $1 is
a lot different than doing it with a 1997 Porsche w/ 18k on it. Only one
will raise flags at the DMV. ;)

You can also write on the bill of sale that the car is "in need of major
repairs" and make sure the bill of sale says 'sold as-is with no
warrantee'. Then he won't have to be at the mercy of a crabby DMV clerk
who's having a bad day trying to explain why the car was sold for
virtually nothing. The CA DMV doesn't require any kind of inspection to
transfer title, but will require a smog certificate to issue plates or
tags. Basically, you can own anything you like in CA whether it passes
smog or not, you just can't drive it on the road if it doesn't pass.

I know CA law does not allow the transfer of a motor vehicle for $1 to
anyone but immediate family members (parents, spouse or children). I
bought, repaired & sold a lot of motorcycles when I lived out there and
was a regular customer at the DMV in Fremont from 1988 to 2001. Never
had a dealer's license, though I don't think the rules are any different
about title transfer for them aside from the whole dealer 'temp plate'
deal and the fact that they have a shorter line at the DMV.

Cheers,
 - JJ