Gift Tax Appraisal of Real Estate in California

Short answer: When you give California real estate, or a share of it, to a child, a trust or anyone else, the federal gift tax rules measure the gift by the property’s fair market value on the date of the gift. A gift of a building almost always exceeds the $19,000 annual exclusion for 2026, so a Form 709 gift tax return is generally due even when no tax is owed, and the IRS asks for either a qualified appraisal or a detailed explanation of the value. A gift appraisal values the real estate as of the date of the gift, in a narrative report your CPA can attach to the return. PM Appraisal writes date-of-gift appraisals of every commercial property type, anywhere in California.

Families move real estate to the next generation in a lot of ways. A parent deeds a fourplex or a retail building to a child. A couple puts a share of an industrial building into an irrevocable trust. A widow adds her children to title on a ranch. A family LLC that owns apartments in three counties gives membership interests to grandchildren every year. Each of those is a gift, and each one needs a value as of a specific day. Our commercial property appraisal page explains how a commercial report is built. This guide covers what changes when the purpose is a gift.

General information, not legal or tax advice. Talk to your CPA or estate planning attorney about your gift.

When does a gift of California real estate need an appraisal?

Under Internal Revenue Code Section 2512(a), when a gift is made in property, the value of the property on the date of the gift is the amount of the gift. For calendar year 2026, the first $19,000 of gifts of present interests to any one person are excluded from taxable gifts (Rev. Proc. 2025-32, section 4.42). Almost any gift of a building, a lot or a meaningful share of either is worth more than that, so a gift tax return is generally required.

The common real estate gifts we see a CPA or attorney ask about:

Deeding a property, or a share of it, to a child or grandchild. A one-third tenancy in common interest in a retail building is still a gift of real estate.
Transfers into an irrevocable trust as part of an estate plan.
Adding someone to title without them paying full value.
Selling to a family member for less than the property is worth. Under Section 2512(b), when property is transferred for less than adequate and full consideration, the amount by which the value exceeds what was paid is a gift. The appraisal sets the value side of that math.
Gifts of LLC or partnership interests in an entity that owns real estate. The real estate inside still has to be valued (more on this below).

The Form 709 instructions ask the donor to attach any appraisal used to determine the value of real estate, and if none is attached, to give a full explanation of how the value was determined. Gifts between spouses and gifts to charity follow their own rules. Your CPA will tell you which return, if any, applies.

Does filing a gift tax return mean tax is owed?

Often not. Taxable gifts are applied against the donor’s basic exclusion amount, which Section 2010(c)(3) sets at $15,000,000 for 2026, with inflation adjustments in later years. A gift above the annual exclusion uses up part of that amount, and the return is how the IRS keeps track of it.

The return for a calendar year is due on or before April 15 of the following year under Section 6075(b), and an extension of time to file the donor’s income tax return also extends the gift tax return. So a deed recorded in December 2026 needs a value well before April 15, 2027. Plan the appraisal early, especially when several properties or several transfer dates are involved.

What do the gift tax rules ask an appraisal to show?

A gift is “adequately disclosed” on the return only if the return tells the IRS enough about the gift and the basis for its value. Treasury Regulation 301.6501(c)-1(f)(2) lists what the return must include, and paragraph (f)(3) lets the donor submit an appraisal instead of the detailed valuation explanation, if the appraisal meets these requirements:

Who the appraiser is. An individual who holds themselves out to the public as an appraiser or performs appraisals regularly, whose report describes the background, experience, education and any professional memberships that qualify them for this type of property.
Who the appraiser is not. The appraiser cannot be the donor, the donee, a member of either one’s family, or anyone employed by them. A relative who happens to be an appraiser is not the answer.
What the report contains. The date of the transfer, the date the property was appraised and the purpose of the appraisal; a description of the property; the appraisal process; the assumptions, hypothetical conditions and limiting conditions; the information considered; the procedures and reasoning; the valuation method and why it was chosen; and the specific basis for the value, such as specific comparable sales.

Why it matters even when no tax is due: under Section 6501(c)(9), if a gift that should be on the return is not shown on it, gift tax on it can be assessed at any time, unless the gift was disclosed in a manner adequate to apprise the IRS of its nature. A real narrative report is how a donor shows the work behind the number. We write gift reports with that list in mind, and your CPA decides how the report is used on the return.

What value does a gift appraisal use, and as of what date?

The standard is fair market value. Treasury Regulation 25.2512-1 defines it as the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. It is not a forced sale price.

The effective date is the date of the gift. For real estate that is usually tied to when the deed or assignment was delivered or recorded, but the legal date of a completed gift is for your attorney to confirm. The appraisal then looks at the property as it was on that day: its condition, its leases and rent roll, its zoning and entitlements, and the sales and market conditions known or knowable on that date.

If the gift was made in a past year and nobody valued it, the appraisal can still be done. A retrospective appraisal values the property as of the past date of the gift.

Why does the date-of-gift value matter for the person who receives it?

Basis. Property received by gift generally carries the donor’s basis over to the donee under Section 1015(a). There is a catch: if the donor’s adjusted basis is higher than the fair market value on the date of the gift, the fair market value is used as the basis for figuring a loss. A building gifted in a down market can need that date-of-gift value years later, when the child sells.

Compare property passed at death, which generally takes a basis equal to its fair market value at the date of death under Section 1014. Giving now or holding until death is a planning decision for the family and its CPA, not the appraiser, but both paths run on a supported value. Our date of death appraisal guide covers the other side.

What about gifts of LLC, partnership or fractional interests?

Many California families hold real estate in an LLC or family partnership and give membership interests over time. The regulation asks for more in that case: a description of any discount claimed, and where the entity’s value is properly based on the net value of its assets, a statement of the fair market value of 100 percent of the entity without regard to any discount, along with the pro rata share being given.

That starts with the real estate. We appraise each property the entity owns as of the date of the gift. Any minority interest or lack of marketability discount applied to the membership interest is usually the work of a business valuation professional, and your CPA coordinates the two. Our guides on family LLC property appraisals and fractional interest appraisals go deeper. If the family owns property in several counties, one firm can value all of it to the same date: see multi-property portfolio appraisals.

Does California have a gift tax, and what happens to property tax?

California does not tax gifts. Voters repealed the state gift and inheritance taxes with Proposition 6 in June 1982.

Property tax is a different story. A gift of real estate is generally a change in ownership, which means the county assessor reappraises the property. Before February 16, 2021, Proposition 58 let parents pass other real property to children up to a lifetime limit without reassessment. Proposition 19 changed that: the parent-child exclusion now covers only a family home that becomes the child’s principal residence and a family farm. The Board of Equalization’s own FAQ says a rental home passed from parent to child does not qualify. In practice, a gift of a commercial building, an apartment building or a rental to a child is generally reassessed.

Gifts of LLC or partnership interests follow a different set of rules: under Revenue and Taxation Code Section 64, a transfer of entity interests is generally not a change in ownership of the entity’s real estate unless someone obtains control or majority ownership, or other rules in that section apply. Which rule fits your transfer is a question for your attorney or the county assessor.

The assessor sets the new assessed value, not our appraisal. If the new value looks too high, a supported appraisal as of the right date is the evidence for an appeal. See property tax appeal appraisals.

General information. Talk to your attorney, your CPA or the county assessor about how your gift will be taxed and reassessed.

What should you send the appraiser for a gift assignment?

The deed, assignment or transfer document, or the planned date if the gift has not been made yet
A description of what is being given: the whole property, a percentage interest, or entity interests
Leases, rent roll and operating statements for income property as of the date of the gift
Any recent purchase documents, prior appraisals, permits or entitlement documents
For entity gifts: the operating or partnership agreement and a list of every property the entity owns
The name of the CPA or attorney handling the return, so the report fits how it will be used

Your appraiser will confirm the exact list on the first call.

Why do CPAs and estate attorneys call PM Appraisal for gift work?

You talk to your appraiser. No coordinator, no AMC portal. We pick up the phone, and we are your ears and eyes on the property.
Narrative reports that show the work. The sales, leases and reasoning behind the value are in the report, which is the point of an appraisal attached to a gift return.
Every property type. Office, retail, industrial and warehouse, multifamily, mixed-use, hotels and motels, gas stations, land, vineyards and agricultural, medical, religious facilities and special-use property.
Every kind of commercial appraisal. Gift work is one example. We also prepare lending, estate and trust, date-of-death, divorce, retrospective, partition, litigation, eminent domain, tax appeal and consulting assignments.
Statewide. Our team is based in San Diego County and appraises property in every California county.
Rush commercial appraisals in 5 to 7 business days, when a filing deadline is close. See rush commercial appraisals.

Our opinions are independent. We never take an assignment that requires a predetermined value, and our value conclusion is never tied to the result anyone wants.

Standard timing depends on the property and scope. CPAs, estate planning attorneys and families: call (805) 990-9700 to scope a date-of-gift appraisal.

This article is general information, not legal or tax advice. Talk to your CPA or estate planning attorney about your gift and your situation.

Frequently Asked Questions

Do I need an appraisal to give real estate to my children?

In most cases a supported value is needed. The value of a gift of property is its value on the date of the gift under Internal Revenue Code Section 2512(a), and any gift of a building or a share of one to a single person in 2026 will almost always exceed the $19,000 annual exclusion, which means a federal gift tax return (Form 709) is generally due. The Form 709 instructions ask you to attach any appraisal used to value real estate, or to explain in full how the value was determined. Your CPA decides how the gift is reported.

Will I owe gift tax if I give away a commercial building?

Usually not right away. Taxable gifts are first applied against the donor's basic exclusion amount, which Internal Revenue Code Section 2010(c)(3) sets at $15,000,000 for 2026. The return is still required, and the gift uses up part of that exclusion. Whether any tax is due, and how the gift fits a larger estate plan, is a question for your CPA or estate planning attorney.

What does the IRS want to see in a gift appraisal?

Treasury Regulation 301.6501(c)-1(f)(3) lists it: the date of the transfer, the date of the appraisal and its purpose, a description of the property, the appraisal process, the assumptions and limiting conditions, the information considered, the reasoning, the valuation method and why it was used, and the specific basis for the value, such as comparable sales. The appraiser must regularly perform appraisals, describe their qualifications in the report, and cannot be the donor, the donee, a family member of either, or their employee.

Why does the value on the date of the gift matter if no tax is owed?

Two reasons. First, adequate disclosure on the gift tax return affects how long the IRS has to question the value. Under Internal Revenue Code Section 6501(c)(9), a gift that is not adequately disclosed can be assessed at any time. Second, under Section 1015 the person who receives the gift generally takes the donor's basis, but if that basis is higher than the fair market value on the date of the gift, the fair market value is used for figuring a loss. The date-of-gift value is the number that answers both questions.

Can you appraise a gift that was made in a past year?

Yes. If a deed was recorded or interests were transferred in a past year and no appraisal was done, a retrospective appraisal values the property as of the date of the gift, using the sales, leases and market conditions that were known or knowable on that date.

Does California have a gift tax?

No. California voters repealed the state gift and inheritance taxes with Proposition 6 in June 1982. A gift of California real estate can still change its property tax, because a gift is generally a change in ownership for reassessment. Since February 16, 2021, Proposition 19 limits the parent-child exclusion to a family home or a family farm, so a gift of a commercial building or rental to a child generally no longer keeps the old assessed value. Ask your attorney or the county assessor about your transfer.

Do you only do gift appraisals?

No. Gift work is one example. Our team appraises every commercial property type, including office, retail, industrial, multifamily, mixed-use, hotels and motels, gas stations, land, vineyards and agricultural and special-use property, and writes every kind of commercial appraisal: lending, estate and date of death, trust, divorce, retrospective, fractional interest, partition, partnership buyouts, litigation, eminent domain, tax appeals and consulting, anywhere in California. Call or text (805) 990-9700.

Giving California real estate to family or a trust?

CPAs, estate planning attorneys and families: call or text (805) 990-9700 with the property, the interest being given and the date of the gift. You talk to the appraiser who will inspect the property and write the report. Rush commercial appraisals in 5 to 7 business days.

(805) 990-9700

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This article is general information, not legal or tax advice. Talk to your attorney or CPA about your situation.

Gift Appraisals of California Real Estate: What the IRS Asks For When You Give Property Away