needed for a valid contract to exist.   It establishes-------for the purposes of the contract--------that legal consideration passed, and that is necessary for the contract to be legally binding on all parties.

However............that phrase doesn't mean jack crap for purposes of the IRS and establishing basis.

JCS indicated that the parents sold the residence to the kids for the amount of 1 and other-------meaning that if that was the actual sales price, ie the actual amount that passed hands---------------for IRS purposes, there had to be on offset to the market value of the property, even if that market value was substantially less than original cost.

Under the tax laws..........forget those items needed for binding contracts---------apples and oranges..........there is always a fair market value, and that fair market value is what changes hands.  If one party receives something with fair market value, but does NOT give up equal amount of fair market value (cash, note, boston baked beans, whatever), then the difference is a gift-----------end of story.

In the post, I read it as though the parents received nothing but maybe a dollar bill and lots of love and affection, whereas the kids received a physical asset that has some market value...........ie some value to a third party.  ERGO-------------the kids received a dollar's worth of house for the dollar they gave up, plus a lot of additional house for the love and affection portion of the sales price-----------the latter being a gift under the Code.

If gift tax returns were not filed for this transaction, the IRS can come back on that transaction whenever they want------20 years hence, since if no return was filed, there is no beginning of the statute of limitations, so that taxable event--and the related tax---- is open foreever..................'cause remember, one does not automatically get the use of the unified credit to offset taxable gifts (those exceeding the annual allowed exclusion---which, I think someone said, is now 13,000)------must ask for it, ie make the election.

Dangerous situation since the IRS can add penalties and interest to the gift tax that is calculated, ie not offset by the unified credit.....................just think about what a 20K tax would be, after adding compounded interest, late filing penalties, and late payment penalties-------for 20 years.

So.........to directly address your concern---------------the phrase is just fine for purposes of establishing a legal contract...................but, it does not do squat for establishing basis, sales prices, etc etc needed for the IRS side of the coin.   That side will take cancelled checks, notes, etc................and if there is no evidence of hard consideration paid for consideration received--------the difference will be a gift.

A comment about the statute of limitations........................we filed back returns for probably 15 different taxpayers this year, due to IRS notices resulting from 1099 disclosures, people wanting to get the stimulus money, etc etc...........and when we got into the deal, found that there were back taxes due, etc.

In one case a quite elderly lady was in a real crap storm................her son........older than I am..........brought in her data beginning in 2000.  She had inquired of IRS as to whether or not she needed to file returns anymore, and of course the IRS person said no, since I am sure they were operating on what I bet she told them-------why no, I have no income, I get social security--------------forgetting that in the next year she sold assets, rented the farm, etc etc.

Long story short, when we looked at the preliminary returns, I about dropped over-------she owed a ton of tax, and after adding estimated amounts for penalties and interest..............just a lot of money for 2000---2008.

Fortunately, after digging and whining, we found that the son had purchased some equipment for the farm, which we were able to expense, and get a carryforward, which eliminated enough of the tax to get things down to acceptable range.

The point to the story------------if she had just filed returns, even if such showed zero net income, all of those years would have been barred from scrutiny by IRS, or at least any penalties would have been cut drastically.

File returns, file returns on your kids, file returns on your parents..............just make sure returns are filed.   That includes payroll tax returns, sales tax returns, gift tax returns---------all returns.