The federal gift tax is a tax on the transfer of property from one individual (the donor) to another (the donee) when the donor receives nothing—or less than full value—in return. The tax applies whether the donor intends the transfer to be a gift or not.

The gift tax applies to the transfer of a gift of any type of property. You make a gift if you give property (including money) or the use of or income from property without expecting to receive something of at least equal value in return. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

For additional information, see Internal Revenue Service (IRS) Form 709 and its instructions.

The federal gift tax is applicable to any transfer of property where the donor does not receive full value in return, and it is enforced regardless of the donor's intent for the transfer to be a gift. This includes money, physical property, or the use of or income from property. In California, as in all states, the federal gift tax rules apply. If a person sells something below its full value or extends an interest-free or reduced-interest loan, it may be considered a gift for tax purposes. Each individual has an annual gift tax exclusion amount, which is adjusted periodically for inflation, and amounts gifted below this threshold do not require reporting or taxation. Gifts exceeding this amount may require the filing of IRS Form 709, and taxes may be owed. It's important to note that California does not impose a state gift tax; only the federal regulations apply. Taxpayers in California should consult with an attorney or tax advisor to understand their obligations under federal law when considering making a gift that could potentially trigger the federal gift tax.