They’ve Deeded a Slice of the Duplex to Each of Their Three Kids Every January Since 2019. The Rent Follows the Deed, and Not One Gift Has Ever Crossed the Line Where the IRS Wants a Form

Annual transfers of fractional interests in rental properties to children may avoid triggering a gift-tax return, but they can create a significant tax-basis trap for heirs. The strategy risks increasing future capital-gains taxes by forfeiting the potentially more favorable step-up in basis available through inheritance, potentially costing more than estate tax savings.