If a parent sells his home to his adult child at half the appraised price, this would be considered a gift, says nj.com in the article “I’m selling my home to my son at a discount. Is it considered a gift?”

The amount of the gift would be the difference between the value and the amount paid. In this example, if the bank-appraised value of the property is $700,000, and the parent is selling it for $340,000, the $360,000 will be treated as the amount of the gift.

The gift must be reported to the IRS on IRS Form 709 by April of the following year.  The gift tax is a tax on the transfer of property by one person to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

Not all gifts need to be reported, however.  An individual can gift $15,000, adjusted for cost of living over time, to a person each year without reporting the gift. However, if the gift to a single person is more than $15,000, then IRS Form 709 must be filed to report the gift.

When reporting the gift, the value of the gift is applied against the available federal basic exclusion amount of the donor (the person making the gift). Only if the gift value is more than the available federal basic exclusion amount, is there a tax that’s due.

The current federal basic exclusion amount is $11.4 million per person for the year 2019.

Many states don’t have a gift tax, so there would be no state filing if the property is located in a state that doesn’t have a gift tax on the books.

Reference: nj.com (September 17, 2019) “I’m selling my home to my son at a discount. Is it considered a gift?”