05 Dec Gift Tax on Transferred Real Estate
The person or entity transferring a property has a capital gain to the extent that the amount realized exceeds the adjusted basis of the property. However according to Reg § 1.1001-1(e) no loss is allowed on a transfer that is part sale and part gift, if the amount received is less than the adjusted basis.
For example if you gift a $600,000 property to your grand daughter the excess of the Fair Market Value (FMV) of ($600,000) over the amount of money received in exchange or realized ($0) is considered a gift for tax purposes reported on IRS Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return. It is also eligible for the annual gift tax exclusion as well as the limits on the life time exclusion.