Key Takeaways

Freedom of contract means you can sell land at any price a willing buyer agrees to pay — there is no law requiring a seller to charge fair market value in an arm's-length transaction between unrelated parties.
When you sell below fair market value to a family member or related party, the IRS may treat the discount as a taxable gift — under IRC Section 2512, the difference between what you received and what the property is worth counts as a gift, subject to the annual exclusion ($19,000 per recipient in 2025 and 2026) and the lifetime exemption ($13.99 million in 2025; $15 million in 2026 under the One Big Beautiful Bill), per IRS Form 709 instructions and IRS FAQ on gift taxes.
A below-market sale permanently reduces the buyer's cost basis — under IRC Section 1015, a buyer who receives property as part-gift and part-purchase inherits a blended basis, which affects how much they will owe in capital gains tax when they eventually sell, according to Cornell LII.

Can You Sell Your Land for Any Price You Want?

Yes — with one important set of caveats. As a property owner in the United States, you are generally free to sell your land at any price you and a buyer mutually agree to. Freedom of contract is a foundational principle of U.S. law: competent parties can set the terms of their own deal without a court or government agency approving the price.

But "free to set any price" is not the same as "free from consequences." The tax and legal consequences of a below-market sale — particularly to a family member or a related party — can be significant and are frequently misunderstood. If you sell land to a stranger at whatever price they'll pay, the legal analysis is simple. If you sell to your adult child at a steep discount because you want to help them, the IRS has a formal framework for treating that discount as a gift, and your buyer will carry a tax footprint on the property that could cost them real money years down the road.

This guide walks through both sides: the legal freedom you have, and the tax and legal constraints that attach when a sale strays far from fair market value. For help thinking through what price to set in a standard arm's-length sale, see how to price land to sell and how much is my land worth. If you're considering a pure transfer with no money changing hands, gift or transfer land to family covers that path directly. And when you're ready for a firm written number on your specific parcel, request a no-obligation offer — no commitment required.

Is There a Legal Minimum Price for Selling Land?

In a standard arm's-length sale between unrelated parties, there is no legally required minimum price. You could accept an offer that is well below what neighbors might call a fair price, and no law will intervene to void the transaction purely because of the price. This is what courts call freedom of contract.

The practical limits on pricing in an arm's-length deal are economic, not legal: a lender-financed buyer must get an appraisal that satisfies the bank, but a cash buyer faces no such constraint. Between you and a cash buyer who accepts the price, the deal is the deal.

There are narrow exceptions where a price can be challenged:

Fraudulent conveyance / fraudulent transfer. If you sell land at a deeply discounted price while you have creditors — for example, you are being sued, you owe back taxes, or you are approaching bankruptcy — courts and creditors can challenge the transaction. The Uniform Fraudulent Transfer Act (adopted in some form by most states) allows a court to unwind a sale if the seller received less than reasonably equivalent value and was insolvent at the time or rendered insolvent by the transfer. The intent to hinder, delay, or defraud creditors is a separate basis for challenge. If you have existing liens or judgments, see how to sell land with a lien or cloud on title for how those are handled in a legitimate sale.

Homestead and creditor-protection laws. A handful of states impose restrictions on transfers of homestead property, and some deed restrictions or community-property rules require a spouse's consent regardless of price.

Lien and encumbrance payoffs. You cannot simply ignore a mortgage, tax lien, or judgment lien by naming a price that doesn't cover it. The lien stays with the property (or must be paid at closing) regardless of what the purchase contract says. That is a title issue, not a pricing one.

Outside those three categories, you as the landowner are free to name your price.

What Happens When You Sell Land Below Fair Market Value — Especially to Family?

This is where the post earns its title. The most common scenario where pricing freedom runs into real tax consequences is a below-market sale to a family member: a parent selling land to an adult child, spouses selling between each other, or a grandparent helping a grandchild onto property at a steep discount.

The IRS treats the discount as a gift.

Under IRC Section 2512, when you transfer property "for less than an adequate and full consideration in money or money's worth," the amount by which the fair market value exceeds what you received is deemed a gift. If your land has a fair market value of $200,000 and you sell it to your daughter for $120,000, the IRS considers you to have made an $80,000 gift — even though a sale occurred and money changed hands.

That deemed gift flows through the same gift tax framework as any other gift:

Annual exclusion. In 2025 and 2026, the annual exclusion per recipient is $19,000 (confirmed by the IRS gift tax FAQ for both years). You can give up to that amount to any individual in a calendar year without it counting against your lifetime exemption or triggering a filing requirement. For the $80,000 scenario above, the first $19,000 is sheltered by the annual exclusion and the remaining $61,000 reduces your lifetime exemption.

Lifetime exemption. The federal lifetime gift and estate tax exemption was $13.99 million per person in 2025 (per Form 709 instructions). For 2026, the One Big Beautiful Bill (signed July 4, 2025, as Public Law 119-21) increased the basic exclusion amount to $15 million per person. The vast majority of landowners will never exhaust their lifetime exemption — the gift tax only becomes a real cash liability when cumulative taxable gifts and estate exceed that threshold. But the transaction must still be documented and potentially reported on IRS Form 709 (Gift Tax Return), even when no tax is owed.

Fair market value is the measuring stick. The key phrase in Section 2512 is "fair market value" — the price a hypothetical willing buyer and willing seller would agree to, with no compulsion on either side and both having reasonable knowledge of the facts. This is the same standard used for estate tax purposes, and the IRS or a court can challenge a valuation that appears designed to minimize the gift component. Using a qualified appraiser to document FMV before a below-market family sale is the standard professional advice for this reason.

How Does a Bargain Sale Affect the Buyer's Tax Basis?

This is the sleeper issue of below-market family land sales. The seller often thinks about the gift-tax angle and forgets that the buyer may carry a tax problem for decades.

The carryover basis rule (IRC Section 1015). When property is transferred partly as a sale and partly as a gift — a "bargain sale" — the buyer's cost basis in the property is calculated under a blended rule. The buyer does not simply step up to the price they paid, nor do they automatically get the seller's original basis. The specific calculation depends on how the transaction is structured, but in general:

The buyer's basis cannot exceed what they actually paid plus any gift tax paid by the donor attributable to the transaction.
On the portion treated as a gift, the buyer typically receives the seller's carryover basis, not a fresh basis at the sale price.

Why this matters. If the seller originally bought the land for a low amount years ago, a bargain sale may leave the buyer with a very low adjusted basis in the property. When the buyer eventually sells — whether in five years or fifty — their taxable gain is calculated from that low basis, not from the price they paid in the bargain sale. A "discount" today can become a larger capital gains tax bill later. For more on how gains from land sales are taxed, see capital gains tax on selling land and does selling land count as income.

The charity exception. IRC Section 1011(b) has a specific bifurcated-basis rule for bargain sales to charitable organizations. This is a specialized area with its own calculation, and it is not the same as a family bargain sale.

What Is the IRS's Scrutiny of Related-Party Sales?

Even when money genuinely changes hands, related-party transactions get a harder look from the IRS than arm's-length deals. The legal framework for this is IRC Section 267, which addresses transactions between persons with close financial or family relationships.

Who counts as a related party under Section 267? The statute lists 13 categories, but the most common in land transactions are:

Family members: siblings, spouses, parents, grandparents, children, grandchildren
An individual and a corporation where that individual owns more than 50% of the stock
Grantors and fiduciaries of trusts
Partnerships and corporations under common 50%+ ownership

What the scrutiny means in practice. For land sales, two consequences are most relevant:

Loss disallowance. If you sell land to a related party at a loss — say you sell for less than your own purchase price — that loss is not deductible on your federal return. The related-party loss disallowance rule under IRC Section 267 prevents this. Note that a subsequent sale by the related-party buyer can use that suspended loss to offset their own gain, but it is lost if the second buyer also holds the property for a loss.
IRS gift-tax scrutiny on the discount. Any discount in a related-party sale invites the IRS to examine the transaction and potentially recharacterize the discount as a gift, as discussed above. An appraised FMV at the time of sale is the clearest way to document that the price was intentional and understood.

Arm's-length transactions. When you sell land to a stranger with no business or family relationship — what the tax code calls an arm's-length transaction — the related-party rules simply don't apply. The IRS generally respects the agreed price as the fair market value, absent specific evidence of manipulation.

Arm's-Length Sale vs. Below-Market / Family Sale: Key Differences

Factor	Arm's-Length Sale (Unrelated Buyer)	Below-Market / Family Sale
Price freedom	Full — seller and buyer agree to any price	Full — but the IRS measures consequences against FMV
Gift-tax exposure	None — no gift element in an arm's-length deal	Yes — discount vs. FMV is a deemed gift under IRC § 2512
Gift reporting (Form 709)	Not required	Required if deemed gift exceeds annual exclusion ($19,000 per recipient, 2025–2026)
Buyer's cost basis	Buyer's basis = purchase price paid	Blended / carryover basis under IRC § 1015; may be lower than price paid
Capital gains on later resale	Calculated from buyer's purchase price	May be calculated from seller's original lower basis — higher future gain
IRS scrutiny	Low — price presumed to reflect FMV	Elevated — IRS can challenge valuation and recharacterize discount as gift
Loss deductibility for seller	Deductible if genuine	Disallowed if sold to related party at a loss (IRC § 267)
Documentation recommended	Standard purchase agreement + deed	Qualified appraisal strongly recommended to document FMV

Thinking About Selling Your Land? Get a Firm Number First.

Understanding the rules is one thing — knowing what your specific parcel is actually worth in a real transaction is another. At Jerez Land, we review each parcel individually and present a firm written cash offer with no obligation to accept. There is no commission, no listing period, and no financing contingency.

Request your no-obligation offer and you'll have a concrete number in hand to weigh against any other path — including a below-market family sale or a traditional listing. Browse more guides on every aspect of land ownership and selling on the blog.

Frequently Asked Questions

Can I legally sell my land for $1 to a family member?

Yes — a $1 sale is legally valid as a transaction. However, the IRS will treat nearly the entire fair market value of the property as a deemed gift under IRC Section 2512. That gift must be reported on Form 709 if it exceeds the annual exclusion ($19,000 per recipient in 2025 and 2026), and the excess reduces your lifetime exemption ($13.99 million in 2025; $15 million in 2026). The buyer's cost basis will be tied to the seller's original basis, not the $1 price paid, which can create a large capital gains exposure when they eventually sell.

What is the annual gift tax exclusion for 2025 and 2026?

The federal annual gift tax exclusion is $19,000 per recipient for both 2025 and 2026, according to the IRS FAQ on gift taxes. This means you can give up to $19,000 to any single individual each calendar year without reducing your lifetime exemption or triggering a Form 709 filing requirement. For married couples who split gifts, the combined amount is $38,000 per recipient per year.

Do I have to report a below-market family land sale to the IRS?

If the deemed gift portion of the transaction (the difference between fair market value and the price paid) exceeds the annual exclusion ($19,000 per recipient in 2025 and 2026), you are required to file IRS Form 709 — the United States Gift Tax Return — for the year of the sale. Filing Form 709 does not necessarily mean you owe gift tax; it reports the amount against your lifetime exemption. A tax professional can help you determine whether a filing is required and how to document fair market value.

If I sell land below market value, can I deduct the loss?

It depends on who the buyer is. In an arm's-length sale to an unrelated party, a genuine loss is generally deductible on your tax return, though land sales have their own rules around capital losses. But if you sell to a related party — defined under IRC Section 267 to include family members, entities you control, and certain trust arrangements — the loss is disallowed for federal tax purposes, even if the sale was at a genuine below-market price. The loss does not simply vanish; the buyer may be able to use it to offset their own gain when they sell, but only up to the amount of the suspended loss.

Can a creditor undo a below-market land sale?

Potentially yes, if the sale looks like a fraudulent transfer. Most states have adopted laws (based on the Uniform Fraudulent Transfer Act or similar) that allow creditors to challenge a property transfer where the seller received less than reasonably equivalent value and was insolvent at the time or was rendered insolvent by the transfer. If you are selling land while facing a lawsuit, significant debt, or potential bankruptcy, the price you receive matters — a steep discount to a family member in that context is exactly the scenario creditors and courts scrutinize. This is a situation where consulting a real estate attorney before closing is essential.

What is a "bargain sale" and how does it differ from a gift?

A bargain sale is a transaction that is partly a sale and partly a gift — you receive some money, but less than the property's fair market value, so the discount is treated as a gift under federal tax law. It differs from a pure gift in that money or other consideration actually changes hands. The tax treatment is a hybrid: the seller calculates gain or loss based on the amount actually received, and the buyer receives a blended cost basis that reflects both the purchase price and the gift element. A pure gift involves no payment at all, and the entire property value may be subject to gift tax rules. For pure transfer situations, see the guide on gifting or transferring land to family.

Disclaimer: This article is for informational purposes only and does not constitute legal, financial, or professional advice. Laws, regulations, and tax rules vary by jurisdiction and change over time. The gift tax figures cited reflect federal law as of mid-2026; state gift or inheritance tax rules may differ. Always consult a licensed real estate attorney, CPA, or tax professional before making decisions about pricing, transferring, or selling property. Jerez Land is not responsible for actions taken based on this information.

Can I Sell My Land for Any Price I Want?