Capital gains tax and its impact on real estate is one of the most widely-misunderstood nuances of modern tax law. Perhaps the most important concept related to capital gains tax is known as "tax basis" or "cost basis." This is the value of the property at the time you acquired it, usually the purchase price. This number becomes locked at that date and will not adjust as the property value appreciates over time. If you plan to give property to your children or leave it to them when you pass away, the way in which these transactions are handled can result in major tax consequences for your children decades in the future. It is important to understand how estate planning strategies will affect your tax basis and discuss the options with a professional before embarking on a plan.