California Code of Regulations
Title 18 - Public Revenues
Division 2.5 - State Controller
Chapter 2 - Gift Tax
Article 1 - Definitions
Section 15106 - Transfer for Inadequate Consideration

A transfer of property for a valuable yet inadequate consideration in terms of money or money's worth constitutes a gift of the difference between the value of the property transferred and the value of the consideration received. Thus, for example, A transfers property valued at $10,000 to B in return for property valued at $5,000. The difference between the values of the property, or $5,000, represents a gift from A to B. There would be no gift in such case, however, if the transaction represented a bona fide sale or exchange made in the ordinary course of business and was free from donative intent.

Any consideration for a transfer not reducible to a money value, such as love and affection or a promise of marriage, will be disregarded, and the entire value of the property transferred will be treated as the amount of the gift.

NOTE: Reference: Section 15106, Revenue and Taxation Code.