Giving your apartment in China to your child, or selling it first? Form 709 and the U.S. tax on the sale

U.S. citizens and green card holders domiciled in the U.S. are subject to U.S. gift tax on gifts of property anywhere in the world, including an apartment in China. A gift of more than $19,000 to one person in 2026 requires Form 709. The excess is applied against the $15,000,000 lifetime exemption, and no gift tax is due until that is used up.

• Form 709 is the donor's own, separate return. It isn't a schedule to Form 1040. It is due April 15 of the following year; extending your income tax return (Form 4868) also extends Form 709, and Form 8892 extends it on its own. Extensions cover filing, not payment.
• A filing, usually with no tax. The 2026 lifetime exemption is $15,000,000, as set by the One Big Beautiful Bill Act (OBBBA), with no expiration date and inflation adjustments from 2027. Gifts and your estate share it, so whatever you use now reduces what is left at death.
• No Form 3520. Form 3520 is filed by a U.S. person who receives a gift from a foreign individual. You are the giver, so you file Form 709; your child isn't a U.S. person and files no Form 3520 either. See our guide at yclcpa.com/gift.
• "Resident" means domicile. For gift tax, residence is about domicile, not just the green card. A green card holder living in the U.S. generally qualifies; one who has moved back to China long term needs a facts-based look.

The gift is valued at fair market value on the date of the gift, converted to dollars at that day's exchange rate. A gift is complete when you give up control and the transfer is complete under local law. In China, a change in real property ownership takes effect on registration, so the year of the gift is generally the year the title transfer is registered.

• Year of the gift: if you sign a gift agreement in December and the title is registered in January, it is generally a gift in the later year, reported on that year's Form 709. Look at the contract and the registration documents; when in doubt, the registration date is the safer choice.
• Describe the property: address, title certificate number, floor area, how it was held (sole or with a spouse), and the recipient's name and relationship to you.
• Value: fair market value on the gift date, usually supported by a Chinese appraisal report or a detailed description of the valuation method (for example, recent sales in the same complex).
• Adequate disclosure: a complete Form 709 with an appraisal or a description of the method counts as adequate disclosure, and only then does the IRS's 3-year period to challenge the value start running from the filing date. Without adequate disclosure, that clock doesn't start.
• A mortgage your child takes over: this can be treated as part sale, part gift, which may give you some gain. It needs its own calculation.

Whoever owns the home is the donor. A home you owned before marriage is yours alone to give. A home bought during the marriage is generally community property under Chinese law, so each spouse may be the donor of half. A child without U.S. status has no U.S. filing, and the home's later growth is outside the U.S. tax system.

• Owned before marriage: only you file Form 709. If your spouse is a U.S. citizen or resident, you can elect gift splitting, but both of you then file a Form 709; with a $15,000,000 exemption, it's usually unnecessary.
• Owned jointly after marriage: confirm each spouse's share from the title and Chinese law. If your spouse is also a U.S. tax resident, each of you generally files a Form 709. If your spouse isn't, their half is a gift of foreign real estate by a nonresident, which is generally outside U.S. gift tax.
• The child, U.S. side: a child who isn't a U.S. person has no U.S. filing; later appreciation, rent or a sale don't touch U.S. tax. But if the child later becomes a U.S. tax resident and sells, their basis generally carries over from yours (IRC §1015), so the gain since your original purchase may be taxable in the U.S. Inherited property, by contrast, generally takes a basis equal to its value at death (§1014). If the child may move to the U.S., factor this in early.
• The child, China side: the recipient generally pays deed tax (rates are set by each province; 3% is common). When the child later sells, Chinese individual income tax is generally computed from the original purchase cost. How exemptions such as the "five years, only home" rule apply should be confirmed with a Chinese tax advisor.
• The home itself isn't on the FBAR or Form 8938. Real estate you hold directly and don't rent out isn't a financial account. Rental income must be reported on Form 1040. If sale proceeds sit in a Chinese bank account, check the FBAR rules at yclcpa.com/fbar.

U.S. tax measures the gain in dollars: the sale price at the sale-date exchange rate, less selling costs, minus your cost (purchase price plus improvements), each converted at the rate on the day you paid it. Getting a green card doesn't reset your basis, so all appreciation from purchase to sale is in the gain.

• Not "the RMB gain times 20%." The exchange rate moves the dollar result. If you bought when the RMB was stronger than at the sale, the dollar gain is smaller than the RMB gain converted at today's rate, and vice versa.
• A dollar loss isn't deductible. A loss on a personal residence is a personal loss, even if it comes only from the exchange rate.
• An RMB mortgage: if the RMB has weakened since you borrowed, paying off the loan can create a separate, taxable exchange gain in dollars; an exchange loss is generally not deductible. Personal-residence loans fall outside the usual §988 rules and are measured under Rev. Rul. 90-79 and related authority, so this is worked out case by case.
• Where it is reported: a sale abroad usually comes with no Form 1099-S. If there is taxable gain above the exclusion, report it on Form 8949 and Schedule D. If the whole gain is excluded and you got no Form 1099-S, IRS Publication 523 says you don't need to report the sale, but keep the purchase, sale, exchange rate and residence records.
• Sold before you became a U.S. tax resident: gain on foreign real estate is generally not taxed by the U.S. In your first green card year, check your residency starting date; if you and your spouse elect under §6013(h) to be treated as residents for the full year, the gain comes in.

Yes. IRC §121 doesn't care which country the home is in. If you owned the home and used it as your main home for a total of 2 years in the 5 years before the sale, you can exclude up to $250,000 of gain. On a joint return, up to $500,000 if either spouse meets the ownership test, both meet the use test, and neither used the exclusion in the prior 2 years. Wait much more than about 3 years after moving out and you no longer pass the 2-of-5 test.

Description: Example (hypothetical numbers, to show the method). Bought and moved in March 2012, moved to the U.S. in June 2024, home left empty and not rented. Count back 5 years from the sale date and see how long you lived there in that window.

Sale date	5-year look-back window	Time lived there in the window	Exclusion available?
September 2026	2021-09 to 2026-09	2021-09 to 2024-06, about 2 years 9 months	Yes
June 2027	2022-06 to 2027-06	2022-06 to 2024-06, right at 2 years	Yes, at the limit
October 2027	2022-10 to 2027-10	2022-10 to 2024-06, about 1 year 8 months	No full exclusion; only a possible partial one
Rule of thumb	Move-out date + about 3 years	—	Check the exact days against your actual dates

• Years in China count. The use test doesn't require you to have been a U.S. tax resident, so time living there before you immigrated counts.
• Joint return, spouse didn't live there 2 years: generally no $500,000; the exclusion is figured for the qualifying spouse on their own, usually $250,000.
• Home owned with a nonresident spouse who doesn't elect to file jointly: you generally report only your share of the gain and use your own $250,000.
• Less than 2 years: a sale mainly because of a job change, health, or other unforeseen circumstances may get a partial, prorated exclusion.
• Rented after you moved out: report the rent on Form 1040; gain equal to depreciation allowed or allowable for the rental period can't be excluded. Renting after you move out generally doesn't reduce the exclusion, but renting or vacation use after 2008 and before you moved in as a main home does.

Gain above the exclusion on a home held more than a year is long-term capital gain, taxed in 2026 at 0%, 15% or 20% depending on where your total taxable income falls. Higher earners may add the 3.8% net investment income tax (NIIT), and state tax is separate. Chinese income tax paid on the sale can be claimed as a foreign tax credit on Form 1116.

• NIIT: if modified AGI exceeds $200,000 (single), $250,000 (joint) or $125,000 (separate), 3.8% applies to the lesser of net investment income or the excess. These thresholds aren't indexed. Gain excluded under §121 isn't investment income.
• State tax: living in North Carolina or another state with an income tax means state tax on the taxable gain too.
• Foreign tax credit: gain on real estate in China is foreign-source income. Chinese individual income tax may be credited; VAT and deed tax aren't income taxes and can't be. Gain covered by the exclusion carries no U.S. tax, which limits the credit you can use.

Example (hypothetical numbers, to show the method). You are single and live in the U.S. You bought your apartment in China in 2012, lived there until you moved to the U.S. in June 2024, and in September 2026 you either sell it or transfer it to your daughter, who has no U.S. status.

Description: Example (hypothetical numbers, to show the method). Exchange rates are assumed rates on each date; RMB divided by the rate gives dollars.

Item	RMB	Rate	USD
2012 purchase price	RMB 1,800,000	6.30	$285,714
2016 improvements	RMB 200,000	6.60	$30,303
Total basis	RMB 2,000,000	—	$316,017
September 2026 sale price less selling costs	RMB 5,880,000	7.10	$828,169
Gain in dollars	—	—	$512,152
Less §121 exclusion (single)	—	—	−$250,000
Taxable long-term capital gain	—	—	$262,152
Federal tax at 15% (other income $110,000)	—	—	About $39,323
NIIT: MAGI about $372,152; $172,152 above $200,000 × 3.8%	—	—	About $6,542
If instead transferred to your daughter in September 2026: appraised value	RMB 6,000,000	7.10	$845,070
Form 709: taxable gift after the $19,000 annual exclusion	—	—	$826,070, applied against the lifetime exemption; gift tax $0

Notes:

• Converting the RMB gain of RMB 3,880,000 at 7.10 would give $546,479, overstating the gain by about $34,000.
• A married couple filing jointly who both lived there 2 years can exclude $500,000, leaving $12,152 of taxable gain, which may fall in the 0% or 15% bracket depending on household income.
• State tax, Chinese tax and the foreign tax credit are left out above.
• Giving your daughter cash after the sale is also a Form 709 gift: giving $770,000, for example, means $751,000 after the $19,000 exclusion, applied against the lifetime exemption, usually with no gift tax.
• With a direct gift, you have no U.S. income tax that year; your daughter pays Chinese deed tax, and if she later sells, Chinese income tax is generally figured from the original RMB 2,000,000 cost.

Both routes mean a Form 709 and usually no gift tax; the differences are in income tax and Chinese taxes. If your child wants to keep the home, a direct gift is simpler. If the home will be sold sooner or later, consider selling it yourself while §121 still applies, so gain within the exclusion is free of U.S. tax, and then giving the cash. Which fits depends on the variables below; this guide only sets out the direction.

Description: compare the two routes row by row. Chinese tax rules vary by city and family relationship; confirm them with a Chinese tax advisor.

Item	Give the home to your child	Sell it yourself, then give the cash
U.S. gift tax return	Form 709, at the home's value on the gift date	Form 709, for the cash given
U.S. gift tax	Usually $0 within $15,000,000	Usually $0 within $15,000,000
Your U.S. income tax	None that year	Gain above $250,000 / $500,000 at 0% / 15% / 20%, possibly 3.8% NIIT and state tax
Chinese taxes on the transfer	The child pays deed tax as the recipient (rules vary locally)	Sale taxes under Chinese rules (the "five years, only home" rule may exempt income tax); no deed tax for the child
When the child later sells	Chinese income tax generally uses your original cost	Not applicable
If the child later becomes a U.S. person	Basis carries over from yours, so a later U.S. tax can be larger	Cash, no basis issue
Fits when	The child will live in it or keep it long term	The home will be sold and you are still within the §121 window

The variables that drive the comparison:

• Purchase price and year, improvements, and the exchange rate on each date;
• How long you and your spouse each lived there, when you moved out, and how much of the 3-year window is left;
• Household income that year, which decides 0%, 15% or 20% and whether NIIT applies;
• Whether your child will keep or sell the home, and whether they may move to the U.S.;
• Chinese taxes: the "five years, only home" rule, deed tax, and income tax when the recipient later sells, to be confirmed with a Chinese tax advisor.

Two things to check along the way: if your spouse isn't a U.S. tax resident, did the two of you already elect under §6013(g) to file jointly as residents in an earlier year (if so, your spouse's worldwide income and foreign accounts on the FBAR must be reported); and was your first green card year's Form 1040 a dual-status return or a full-year resident joint return.

Putting actual numbers on both routes, on both the U.S. and the China side, is a case-specific calculation, which is what our paid in-depth consultation (yclcpa.com/advisory) is for.

Gather the purchase contract and invoices, improvement receipts, proof of residence (household registration, utility bills, move-out date), the title certificate and any appraisal, then follow the stage you're in.

• Situation A: still deciding. Work out your latest sale date under §121, then compare a direct gift with selling and giving cash, with a Chinese tax advisor looking at the China side. For actual numbers on both routes, book a paid in-depth consultation.
• Situation B: already transferred to your child. Confirm the gift year from the registration date and file Form 709 by April 15 of the next year (extended along with your income tax return), with an appraisal or valuation explanation for adequate disclosure.
• Situation C: sold this year. Compute the dollar gain using the purchase-date and sale-date rates, report gain above the exclusion on Form 8949 and Schedule D, and consider Form 1116 for Chinese income tax. If the proceeds are in a Chinese account, check the FBAR and Form 8938.
• Situation D: transferred or sold in an earlier year and didn't report. Form 709 can be filed late; with no tax due because of the lifetime exemption, the late-filing penalty, which is based on tax due, is usually zero, but the 3-year clock starts only once you file. Taxable gain that wasn't reported goes on Form 1040-X with the tax and interest.