Tax question relating to a gift of real estate (I asked similar question before but need more opinions)?

I don't think there's any way out of this. Normally, "gifts" are not taxable to the person who receives it, but in this case the lots would take the place of the fee. So your boss has income equal to the value of the lots at the time he receives them. He possibly could "gift" you a lot, and there would be no tax affect to you, but the IRS would probably challenge it and say that it was a bonus. You might win, and you might lose. If it is a "gift" to you (which if he's not in the habit of giving you a bonus after a successful job, it could wind up as a gift, considering you've been lifelong friends) then there is no tax to you for receiving the gift, but there would be taxes when you sold the lot. If you held the lot for more than 1 year it would be taxed to you as long-term capital gain, which is taxed at a maximum rate of 15% (5% for those in the 10 or 15% brackets). Your boss would also have capital gains taxes as well if he sold his lots for more than they were worth when he receives them. I don't think you both can avoid taxes, but I have given you my best idea to minimize them.