Selling land to a family member

Is selling land to a family member a gift or a sale?

A sale means the buyer pays full value. A gift means the buyer pays nothing or less than full value. The IRS describes a taxable gift as a transfer where full consideration, in money or money's worth, is not received in return.

So a $1 deal for valuable land is mostly a gift. A sale at a price below market value is part sale and part gift. The tax rules follow the actual facts, not the label on the deed.

Can I sell land to a family member below market value?

Yes, you can sell land to a family member below market value, but the gap may count as a gift from you to the buyer. Get a written opinion of value, such as an appraisal, so you know the size of the gap. See how to value vacant land.

Lenders and county offices may also look at the price on the deed. Ask your attorney how your state handles it. Keep the appraisal, the contract and proof of payment in one file. If the family member pays over time, record each payment.

How does federal gift tax work on land?

Federal gift tax applies to the giver, not the receiver. The IRS says the donor is generally responsible for paying it. An annual exclusion applies to gifts to each person. The IRS lists $19,000 per donee for 2026, and $38,000 per donee when two spouses give jointly.

The $38,000 figure for a married couple depends on gift splitting. Under the Form 709 instructions, you and your spouse must have been married at the time of the gift. Neither of you may be a nonresident who is not a citizen. Your spouse must sign the Notice of Consent on Form 709 for the election to be valid. The instructions also say spouses may not file a joint gift tax return, so each files their own.

Gifts above the annual exclusion usually mean filing Form 709. That does not always mean owing tax. The Form 709 instructions say to file no earlier than January 1, but not later than April 15, of the year after the gift. Ask a CPA how this applies to you.

What is the tax basis in a part-gift, part-sale?

In a part-sale, part-gift, the buyer's basis is the larger of what the buyer paid or your adjusted basis at the time of the transfer. Treasury Regulation 1.1015-4 states the rule. Gift tax paid on the transfer can add to it.

The regulation gives an example. A parent sells land to a son for $30,000. The parent's adjusted basis is $30,000 and the fair market value is $60,000. The son's basis is $30,000. If the son paid $60,000 for land with a $30,000 basis and $90,000 value, his basis would be $60,000.

For loss, the basis cannot be more than fair market value at the time of transfer. Basis is the starting number for figuring gain on a later sale. A low basis can mean a larger tax bill for your family member.

What basis does a family member get on a pure gift?

On a pure gift, the receiver generally takes the donor's adjusted basis. IRS Publication 551 covers gifts worth at least the donor's basis. It says "your basis is the donor's adjusted basis at the time you received the gift."

If the gift is worth less than the donor's basis, Pub. 551 sets two bases. Your basis for gain "is the same as the donor's adjusted basis." Your basis for loss is the FMV at the time of the gift. A buyer who pays full price generally starts with their cost as basis.

Does a family transfer raise property taxes in California?

In California, a family transfer can trigger a property tax reassessment, and Proposition 19 limits who is protected. This section applies to California only. Other states use different rules, so ask the county assessor where the land sits.

The California Board of Equalization (BOE) says a change in ownership normally triggers reassessment at market value. That can raise the assessed value and the property tax a lot. Proposition 19 allows a parent-child transfer of a family home or family farm without reassessment, but only under conditions. The exclusion applies to transfers on or after February 16, 2021.

The family home must have been the transferor's principal residence. The child must live in it as a primary residence within one year of the transfer. A family farm must be under cultivation or used for pasture or grazing, or to produce an agricultural commodity.

The BOE also describes a value cap: the property's factored base year value plus $1 million, adjusted for inflation. Any amount above the cap is added to the transferred value. The exclusion is not available for transfers between siblings. The BOE sheet describes the exclusion for a family home or family farm only. If your land is neither, ask the county assessor whether it will be reassessed.

Do I need a deed and title work for a family sale?

Yes, use a proper deed recorded with the county. A title company or real estate attorney can check title and handle the closing. Skipping this can cause trouble later with heirs, lenders and buyers.

Know your deed type and what it promises. Ask your attorney. If a mortgage covers the land, the lender usually must be paid or must agree to the transfer.

Can I owner-finance land to a relative?

Yes, you can carry the loan for a relative. Put it in writing with a note, a payment plan and a recorded security instrument. Treat it like a real loan. An informal handshake can lead to disputes, missed payments and tax questions. See our guide to owner financing a land sale.

Is a cash sale to an outside buyer cleaner?

A sale to an outside buyer sets a clear price and ends the question of gifts. It can also avoid family conflict over price, payments and use of the land. You get cash at closing.

Use the net proceeds calculator to see what you would keep. Liberty Acres is a family-owned land company. We buy land anywhere in the US, in any condition, and close through a title company. We pay back taxes and all closing costs, with no agents and no commissions. We can close in as little as 14 days. Most sales close within a few weeks to a few months, once the title work is done. If a mortgage covers the land, the title company pays it off from the sale price at closing.

Before you sign a deed or a gift, ask a CPA or tax attorney about gift tax and basis.

Common questions