Sounds like a place that would rent for $3,000 a month, even with a discount.  And a mortgage for that would be about $1,000 a month.  Even with taxes, insurance and maintenance she should be paying less than current rent.  I always look for money coming back to the family-member "tenant," but no one is around at IRS to look for that these days. 

Technically, since it's a nondeductible loss it doesn't have to show up on a tax return at all, but it's probably safer to report it the same way you would report loss on second (or even principal) home.  There should be a box to check somewhere so that the 8949 code is correct.  

Unless the client has potential for a $14 million estate (excluding the chance of winning a lottery) I wouldn't put too many resources into the gift tax return.  If the friendly neighborhood Realtor, or the more knowledgeable Zillow, says the house is worth $463K, then use that number.  IRS isn't auditing many 709's these days, but in the unlikely event that they want to add $100K to the valuation, tell them you'd agree to $150K.