@Randy Haynes Give your client a printout of the final depreciation with YTD depreciation for the year of gift. The daughter will need that to set up the rental on her return, or for future reference when she sells. 

Thank you. One of my pet peeves is new clients with rental properties whose previous preparers did not provide the taxpayer with complete depreciation details. I always provide that along with an explanation of the importance it carries upon disposition of the property.

That works but I do not see that it is triggering the passive losses carried forward to be recognized.  Shouldn't they be allowed since this is a complete disposition of the activity?

Thanks, but I must be missing something.  I don't see a box h on Schedule E.  Is that the check box for "Delete this year"?  I tried that and it did not change. 

The passive losses do not get freed up. It is not a "complete disposition in a taxable transaction". Section 469 has rules about what happens or doesn't happen to them. They may get lost.

@DJRogers Be sure you are on the schedule E worksheet. Under heading "Check all that apply" is a box H, Complete taxable disposition. you must check that box. That would release the losses, but see what sjrcpa has to say. Also, When a taxpayer transfers an interest in a passive activity by gift, suspended losses increase the basis of the interest. The increase is deemed to take place immediately before the gift (Sec. 469(j)(6)(A)).

OK, thanks.  I still don't see the box you mentioned but I guess it is a moot point if the losses are not triggered anyway.