Yes, the accountant is correct. It is possible that the gift of equity could result in a bigger capital gains. Let's give an example.
Let's assume your parents cost basis in the house is $500,000 and the sales price is $1.6M. Your parents will have to pay capital gains tax on the difference between their cost basis in the home and the $1.6 million sale price. Since they have given you the gift of equity, they are paying additional capital gains on that $300K. The gift of equity itself is not subject to capital gains tax, but it does affect the overall sale price, which is used to calculate the capital gain.
Additionally, gift of equity can be subject to gift tax. When your parents sell you the home for less than its market value, the difference (in this case, $300,000) is considered a gift. The IRS allows individuals to give up to $18,000 per person per year without having to file a gift tax return. Since the gift of equity exceeds this amount, your parents will need to file a gift tax return.
@Nunez1416
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