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Your incorrect. The mom sold the son the house. She sold him the house for $400, but in reality for $300 because she was gifting him equity of $100k. Parents do this to make the mortgage more affordable for their child or in our case, my brother was being fronted his portion of my dad's future estate. The house appraised at $369k. Dad sold it to brother for $300k. My brother took a mortgage for $125k. This Equity gift primarilly is $300k - $125k leaves $175k equity gift. The Title companies report this. There will be no taxes for either as a parent my equity gift up to $13.1 Million in lifetime contributions to their children. That said, the equity gift has to be reported on Form 709. The Title company will also be reporting the equity gift during title transfer and in most states, the prop tax will adjust on the buyer. The IRS can increase equity gift value as in our case, while house sold for $300k, the true value equity was the $175k and then another $69k based on appraisal. That said, the IRS generally does not do that. All I'm saing has been confirmed by our tax guy, the IRS when I spoke to them and the Turbo Tax expert online. Thus, the discount to the brother is an Equity Gift. By stated their is no equity gift pure and simple, you just told this person they don't need a Form 709. They should talk with a tax expert.