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A gift for gift tax purposes is the transfer of property for less than it full fair market value. A "gift of equity" of $50,000 would create a taxable gift which would require the filing of a Form 709 (gift tax return). I assume you are married (since you said "we") which means each of you are allowed an annual exclusion of $14,000 of gifts that are free of gift tax. If you split the gift between the two of you, that would create a $25,000 gift from each of you and $14,000 would be excluded by each of you resulting in a net taxable gift of $11,000. You can try to get around this by having your niece sign a promissory note for the $22,000 balance that is above the exclusion. The following year you could then make another gift by forgiving the note and any interest due on it. Alternately, you could gift the equity to your niece and another family member so you can take advantage of four annual exclusions and there would be not taxable gift made. A problem with the promissory note is that any mortgage lender might view it unfavorably as the borrowers would have more debt. I should also let you know that a "taxable gift" in this instance does not necessarily mean gift tax would be due. Everyone has a lifetime gift and estate tax exemption $5,430,000 for 2015 and this exemption is indexed for inflation. This means there is no transfer tax due unless your lifetime gifts (plus net taxable estate) exceed the lifetime gift and estate tax exemption. The filing of Form 709 would simply be an informational return unless that threshold is exceeded.
In addition, for income tax purposes, while any gain on the property would be taxed at long-term capital gain rates, you could be subject to a IRC 1250 gain that would need to be recaptured at the 28% rate instead of the regular capital gains rate. The IRC 1250 gain is the amount of depreciation you have claimed on the rental property. In addition, if you have any suspended passive losses on the property, those losses would be freed up and you will be able to deduct the full amount of those losses against ordinary income in the year of disposition. In addition, making this gift will reduce any tax that you owe as the gain will be reduced. I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions. Thanks, Jonathan