The IRS is now reviewing recorded deeds to discover gifts of real estate interests transferred without reporting such gifts on the Form 709 gift tax return. Please see my article entitled IRS Checking Real Estate Transfers For Unreported Gifts that provides an overview of the federal gift tax and the related income tax implications at the following link: IRS Checking Real Estate Transfers For Unreported Gifts
This area of the law has taken on greater importance as the IRS has now begun an aggressive campaign in auditing taxpayers for gifts of real estate interests. This is a must read for anyone contemplating a gift or death-bed transfer of real estate as well as real estate agents and real estate attorneys recommending gifting real estate. Without insight into the gift and income tax implications huge tax mistakes may result.
Bottom Line: Before making any gift taxpayers would be well served to discuss this strategy with their tax attorney or tax accountant to see if it really makes practical, financial and tax sense in your particular situation.