How to use the bargain sale gift tax calculator
Selling a property to a family member for less than it is worth, or handing it over subject to a mortgage the recipient takes on, is a bargain sale: part sale, part gift. The transaction is split, and each half is taxed under a different set of rules.
Section 1011(b) requires you to allocate basis between the two halves. Only the share of basis matching the amount realized divided by fair market value offsets the sale price, which is why a bargain sale often produces gain even when the price looks like a bargain to the buyer. Debt the recipient assumes counts toward the amount realized.
The gift half is the spread between fair market value and what you actually received. Subtract the annual exclusion per recipient and the rest reduces your lifetime gift and estate tax exemption, reported on Form 709. No cash gift tax is due until that exemption is exhausted, so the only tax shown as due now is the capital gains tax.
Figures reflect September 2026 and change with IRS annual adjustments, so the exclusion and rate fields are editable. Actual tax depends on your other income, holding period, depreciation recapture and state rules. Confirm with a CPA or estate attorney before transferring anything.
Frequently asked questions
Under Section 1011(b), a bargain sale to a family member or charity splits the property. Basis is allocated in the same proportion that the amount realized bears to fair market value, so only that slice offsets the sale price.
Generally yes. Relief from a mortgage or other liability is treated as an amount realized, so a transfer subject to debt can produce taxable gain even when no cash changes hands.
Usually not. The gift portion above the annual exclusion reduces your lifetime exemption and is reported on Form 709. Cash gift tax is due only after the lifetime exemption is used up.