SCHEDULE D IS WHERE SALES ARE REPORTED

And if he sold it for less than FMV he can't claim a loss, and he has made a gift to his sister.

You can't claim a loss on a sale to a related party. A sister is a related party.

There is a box in the sale section that you need to choose for related party sales, which will turn any loss recorded to zero.

Good point. Totally slipped my mind.