The difference in purchase price is a gift to the relative. If the gift is more than $17,000, a form 709 gift tax return must be filed by the giver. Actual payment of gift tax is rarely due, unless the lifetime total of the giver’s gifts is more than $13 million, but the form must be filed to track the gift against the person’s lifetime total.
The other issue that was not mentioned, is what will be the recipient‘s cost basis? Cost basis is used to determine taxable capital gains if and when the property is sold. Your brother should document the cost basis now while it is easy to get all the required proof from your mother. Normally, cost basis is what a person pays for a piece of property, or in the case of a gift, cost basis is the cost basis of the original owner. However, I’m not actually sure what the cost basis is in the situation. It might be $50,000, the original cost. It might be $5000, the purchase price. Or it might be something else. In the case of gifts, the cost basis is also sometimes affected by the ultimate selling price, if and when the property is sold. We need to ask another expert.
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@Hal_Al
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