Can I License transfer games xbox one on if it its a digital game?

Are you asking about game sharing or license transfer. License transfer is for digital games. If you want to license physical games you just bring the disk over to your nephew.

License transfer is when you buy the game and then hand the license over to him so that he owns the game and you no longer own it. If you want to play with him then you'll need to license transfer and then buy the game again. Easier to just buy a xbl wallet card and give him the code and tell him to enter it and then buy the game. Don't forget to account for the tax if you live in a state that has sales tax. I can't believe ms charges sales tax for virtual items. I don't think psn charges sales tax got dlc.

Game sharing is when you buy a game then let someone else log in as you to download the game on their system. The game is linked to the account so if the other person logs out and logs in with his account then the game is no longer playable for him. As long as your account is logged in then he can play.