Parents who plan to give real property to their children, during their lifetime rather than through a will, often do so without understanding the tax documentation requirements. The gift is made with good intentions and clear family agreement. The tax implications arrive later, when the IRS requires documentation that was never produced.

The Annual Exclusion and the Gift Tax Filing Threshold

In 2026, the annual gift tax exclusion allows an individual to give up to $18,000 per recipient without filing a gift tax return. For real property worth hundreds of thousands of dollars, the value of the gift almost always exceeds this threshold. Any gift of real property with a fair market value above the annual exclusion requires the donor to file IRS Form 709, the gift tax return.

The gift tax return requires a statement of the property's fair market value as of the date of the gift. For a substantial real property transfer, that valuation must be supported by a qualified appraisal from a qualified appraiser, the same standard required for charitable donations of property and for estate tax valuations.

Why the Appraisal Must Be Contemporaneous

The appraisal must be completed within a specific timeframe relative to the gift, generally no earlier than 60 days before the date of transfer and no later than the due date of the gift tax return. This means the appraisal cannot be done retroactively once the tax filing question arises. If the property was transferred two years ago without an appraisal, a retrospective appraisal can establish the value, but it is harder to produce and potentially harder to defend than one commissioned at the time of transfer.

Families who plan property gifts with their estate attorney and CPA in advance, including scheduling the appraisal before the transfer, avoid this documentation problem entirely.

The Basis Consequence for the Recipient

When property is received as a gift, the recipient's tax basis is not stepped up to fair market value at the time of the gift. The recipient generally takes the donor's basis, or fair market value if lower. This is a significant distinction from an inheritance, where the stepped-up basis applies. For families using gifts of real property as an estate planning strategy, understanding the basis consequence for the recipient is essential before the transfer is executed.

The professional appraisal does not change the basis rule. But it does establish the fair market value at the time of the gift, which is relevant to the recipient's future tax calculation and to the gift tax return documentation.

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Whether you are a homeowner, estate attorney, realtor, CPA, or investor in Greater Boston, Adam Wiener and the Aladdin Appraisal team deliver USPAP-compliant appraisals you can rely on. Call today: (617) 517-3711 | info@aladdinappraisal.com | aladdinappraisal.com