Agree with @Anonymous_.
"Where a transfer of property is in part a sale and in part a gift, the transferor has a gain to the extent that the amount realized by him exceeds his adjusted basis in the property."
26 CFR § 1.1001-1 - Computation of gain or loss. | Electronic Code of Federal Regulations (e-CFR) | ...
@chockstra --
Using your figures:
You have a taxable capital gain of $56K less your adjusted cost basis. Your adjusted cost basis is your original purchase price plus the cost of any capital improvements you made to the property (new roof, room addition, etc.). The mortgage balance is irrelevant and is not part of the capital gain calculation. Your actual capital gain tax amount will depend on whether the gain is short or long term, and on your total taxable income.
You have made a gift to the buyer of $94K, which requires that you file a gift tax return, IRS Form 709, with the IRS. The form is required because $94K exceeds the current gift tax annual exclusion amount of $18K (2024).
No gift tax is due until you exceed your lifetime gift tax exclusion amount, currently $13.61 million, but Form 709 is nevertheless required by the IRS for reporting purposes.
https://www.irs.gov/pub/irs-pdf/f709.pdf
Finally, if the property was ever rented out, you may have tax due for depreciation recapture.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
