Gift the Israeli Apartment Now or Leave It in the Will: The Purchase Tax You Pay Today and the Step-Up You Give Up

This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.

A mother in Ra'anana is seventy-eight and organized. She owns one apartment, she has one daughter in New Jersey, and she has read enough to know that when she dies, the daughter will need a succession order, a lawyer, an apostille, and a year of patience before the apartment is hers. So she asks the practical question: why not just transfer it now?

It is a fair question, and the Israeli answer and the American answer are different enough that families regularly optimize the wrong country. Israel treats the two roads as nearly the same tax with different timing. The United States treats them as two different tax worlds. For a US-citizen or US-resident child who expects to sell the apartment one day, the American difference is usually the one that decides.

This page is the decision itself. What happens after death is covered piece by piece in probate in Israel for US heirs, the mas shevach rules for an inherited apartment, and selling the inherited apartment from the US. What happens if she signs the gift deed instead is this page.

The Israeli side of a gift: no tax on the gain, a third of the purchase tax, and a deferral rather than a forgiveness

Israel has no gift tax and no inheritance tax. What it has is a land taxation system that treats every transfer of real estate, including one for no money, as a reportable transaction, and then carves out the family.

Three rules do the work.

Section 62 exempts the giver. A gift of real estate to a relative is exempt from land appreciation tax (mas shevach), the tax the mother would owe on decades of gain if she sold. The relative list is specific: a spouse, a parent, a descendant, a spouse's descendant, and the spouse of each of these. A sibling qualifies only for property that came from a parent or grandparent by gift or inheritance. A nephew does not qualify at all, and a gift to one is taxed like a sale at market value.

The recipient pays one third of the purchase tax. Purchase tax (mas rechisha) is the buyer-side tax on any acquisition, and a gift recipient pays a third of what an ordinary buyer of the same apartment would pay. What the ordinary buyer would pay depends on who the recipient is. A daughter in New Jersey who is not an Israeli resident, or who already owns a home anywhere, is in the investor and foreign-resident bracket, 8 percent on roughly the first six million shekels at current rates. One third of that is about 2.67 percent. On a three-million-shekel apartment, the gift costs her in the neighborhood of 80,000 shekels, payable within about 30 days of the transaction being reported. If the recipient were an Israeli resident with no other apartment, the ordinary buyer's rate starts at zero up to a threshold, and a third of zero is zero, which is why gifts between Israeli residents are often free and gifts to children abroad are not. A transfer between spouses living together in the apartment has its own fuller relief.

The gain is deferred, not forgiven. The recipient steps into the giver's shoes: her acquisition date and her original price. When the daughter eventually sells, Israeli tax is calculated from what the mother paid in 1989, not from the value on the day of the gift. Israel is comfortable exempting the gift precisely because the tax waits at the exit. This is the same continuity principle that governs inheritance, and it is why, on the Israeli gain itself, the two roads converge: someone pays tax on the full history whenever the apartment finally leaves the family, unless a residential exemption applies at that sale.

That last clause is where gifts pick up a genuine Israeli disadvantage. An apartment received as a gift is subject to section 49F, a cooling period of several years before the recipient can use the residential-apartment exemption on a sale, longer where the recipient did not actually live in the apartment. An inherited apartment is not burdened this way; it has its own dedicated exemption route under section 49B(5) where the deceased owned only one apartment, covered in detail in the inherited-apartment mas shevach page. Either way, a non-resident seller also faces the section 49A(a) condition of proving no residential apartment anywhere in the state of residence, which disqualifies most American heirs and donees alike. The exact cooling periods and the interaction of these sections at a future sale are a question to put to an Israeli lawyer at the time, not a thing to assume from a page.

The Israeli side of an inheritance: not a sale at all

Inheritance is cleaner than a gift on every Israeli line. Section 4 of the Land Taxation Law says inheritance is not a sale. No land appreciation tax event, no purchase tax at all, not a third, not a shekel. The heir takes the same carryover basis the gift recipient would have taken, so the deferred gain is identical, and the heir arrives with the 49B(5) exemption possibility instead of the 49F cooling period.

What inheritance costs is everything this site spends most of its pages on: the succession order or probate order, the foreign-heir paperwork, the Registrar and the seven-day rule, the registration at the Tabu, and the months of process while the apartment sits in limbo. A completed lifetime gift skips all of it. On the day the mother dies, the apartment is already the daughter's, registered, done. For some families that certainty, and the avoided risk of a will contest among siblings, is worth real money. It is the honest core of the case for gifting, and it has nothing to do with tax.

The American side: this is where the roads actually split

For Israeli purposes the two roads carry the same basis. For American purposes they do not, and the daughter in New Jersey files American returns for the rest of her life.

A gift carries the mother's basis into the US system. Under 26 USC 1015, property acquired by gift takes the donor's basis. The mother bought for the equivalent of $60,000 in 1989; the daughter's US basis is $60,000. When she sells the apartment for $900,000 in 2032, the US sees roughly $840,000 of capital gain. Israeli tax paid on the sale generally becomes a foreign tax credit against the US tax on that same gain, which softens the outcome but demands that someone reconstruct a 1989 purchase price, in dollars, with documentation, decades later.

An inheritance resets the basis to date-of-death value. Under 26 USC 1014, property acquired from a decedent takes a basis equal to fair market value at death. This applies even though the mother was never a US person and no US estate tax ever touched the apartment; Rev. Rul. 84-139 says exactly that for foreign real property inherited from a nonresident alien. If the daughter inherits at a $850,000 valuation and sells at $900,000, her US gain is $50,000, not $840,000. The entire appreciation of the mother's lifetime exits the US tax system at the moment of death.

Notice the asymmetry this creates. Israel taxes the full historical gain on the eventual sale in both scenarios. The United States taxes the full historical gain only in the gift scenario. In the inheritance scenario the US gain is small, which also means there is very little US tax for the Israeli tax to credit against, a mismatch explored on the inherited-apartment page. In the gift scenario the two countries are at least taxing the same large gain, and the credit does more work. But a large gain taxed twice with a credit is rarely better than a large gain taxed once and a small gain taxed once. For a child who will sell, the step-up usually wins, and it is forfeited the day the gift deed is signed.

What the giver owes America, if anything

Whether the gift itself triggers anything in Washington depends entirely on who the mother is.

If the parent is not a US citizen or resident, the US gift tax does not reach an apartment in Ra'anana. A nonresident alien is subject to US gift tax only on real and tangible property situated in the United States. No Form 709, no use of any exemption, nothing. The transfer is invisible to the IRS on the giver's side.

If the parent is a US citizen or a US tax resident, and many parents on this site's pages are, the picture changes. A US person is taxed on worldwide gifts. The 2026 annual exclusion is $19,000 per recipient, an apartment exceeds it, and the gift goes on Form 709 for the year of transfer. Almost no one actually pays gift tax, because the excess simply draws down the lifetime gift and estate exemption, $15 million per person in 2026 and now permanent under the 2025 tax act. But the return is mandatory, the exemption ledger is real, and a gift to a spouse who is not a US citizen has its own annual cap of $194,000 rather than the unlimited marital deduction. A US-citizen parent married to an Israeli should also read the estate-tax page for mixed-citizenship couples before moving any large asset, because the gift and estate sides of that ledger are one system.

One more Israeli wrinkle belongs here because it surprises people planning the broader estate. The friendly section 62 regime is a real-estate rule. For other Israeli assets, money, securities, fund units, the Income Tax Ordinance exempts a gift between individuals only where the recipient is an Israeli resident. A gift of an Israeli brokerage account to a child in New Jersey can itself be a taxable event for the Israeli giver. Families who assume "we can just give it all now" are usually thinking of the apartment rule and applying it to everything else.

What the recipient owes America: a form, not a tax

Receiving a gift is not income under US law. The daughter owes no US income tax on the day the apartment becomes hers. What she almost certainly owes is disclosure. A US person who receives more than $100,000 in a year in gifts or bequests from a nonresident alien reports the gift on Form 3520, an information return with no tax due and a brutal penalty for silence: 5 percent of the gift per month late, up to 25 percent. An apartment crosses the threshold on its own. The same form, the same threshold, and the same penalty apply to an inheritance, so this line does not favor either road; it just refuses to be forgotten on both. The mechanics, deadlines, and aggregation rules are on the Form 3520 page.

She should also open a file with two documents in it whichever road the family takes: evidence of the mother's original purchase price and dates, which drives the Israeli tax and, in the gift case, the US basis; and, in the inheritance case, a professional valuation at the date of death, which fixes the US step-up. The cheap version of both documents exists now. The expensive version is reconstructed by an appraiser and an archive search in 2032.

The lines the tax table does not have

A completed gift of Israeli real estate is, in the ordinary case, irrevocable. Once the daughter is registered at the Tabu, the apartment is hers in every legal sense: available to her creditors, on the table in her divorce, and hers to sell or mortgage regardless of what was understood at the kitchen table. A mother who intends to keep living in the apartment needs that right written down and registered, as a retained right of residence or a cautionary note, before signing, not assumed. A gift to a minor needs Family Court approval. And a parent who gifts the apartment to one child to settle things has also removed that asset from every future version of the will, for better and for worse.

None of this makes gifting wrong. It makes gifting a decision about control and family certainty that happens to carry a tax price, rather than a tax strategy that happens to involve family.

What to ask, and who to ask it of

Ask the Israeli real estate lawyer, before anyone signs:

• What the purchase tax on this specific recipient actually is, at this year's brackets, and whether any relief applies.
• How a retained right of residence for the parent is documented and registered, and what it does to a future sale.
• How section 49F and section 49A(a) would sit on the recipient at a realistic future sale date, against the 49B(5) route if the apartment were inherited instead.

Ask the US preparer or estate attorney, with the family's citizenship map in hand:

• What the parent's status is for US gift and estate purposes, and whether a Form 709 or the $60,000 non-resident estate-tax issue on other assets changes the picture.
• What the built-in US gain under a carryover basis would look like against the step-up, using the real purchase history and a real current valuation.
• Who files the Form 3520 and when, whichever road is chosen.

And ask the family the only question the professionals cannot: is the goal to move the apartment, or to move the certainty? The first is usually cheapest at death. The second is sometimes worth paying for now, at about 2.7 percent plus a step-up.