It is my understanding that the new owner will have the house at the cost basis of my purchase price, for calculating capital gains taxes or depreciation.For gift tax purposes for you - FMV.For capital gain tax purposes for the recipient - your original basis/purchase price 

This is tax free. 

Consult your local CPA to calculate accurately and minimize your tax liability.

If you think ahead, you can minimize recapture with the right tax planning.So what is recapture?

I am looking to purchase real estate for both investment purpose as well as to offset as much tax liability as possible. 

Since the real estate is part of the transaction you can't do the 1031 exchange.You could consider an installment sale, to potentially spread the tax liability over several years.

You will want to fully understand the tax reporting burden you will face. 

You need to have the income and tax liability to support the depreciation.

Any tax pro who is familiar with REI will be able to help you.

@Brad Kanouse Using Traditional IRA funds for an investment property typically incurs income tax and a 10% penalty if you’re under 59½, as investment properties don’t qualify for tax exemptions.