As a general rule, gifts are not subject to income tax. However, they have made a gift that is subject to federal gift tax. It's doubtful that they will actually pay gift tax, but the gift should be reported on Form 709. TurboTax does not prepare this form.
Please follow this link for more information. https://www.irs.gov/businesses/small-businesses-self-employed/estate-and-gift-taxes
