The term "gift of equity" is typically used in a sale situation, typically when you sell to a relative at less than fair market value. It has nothing to do with the amount of mortgage that may be a lien on the property.
I'm guessing that you used a title company to effect an actual sale here, probably at a big discount, and maybe the brother & wife assumed the mortgage or something?
This could be a situation where consulting some local professional help may be in order. I'm guessing the "gift" was in the form of a large discount from FMV, but I'm not sure how that discount might be affected if the brother & wife assumed the mortgage. Common sense would say that the gift is the discount minus the mortgage but "common sense" and "income taxes" rarely appear in the same sentence.
Have you filed a gift tax return? That's certainly something you should do.
I think you want to keep that 1099-S out of your income tax return if this was a true "gift" situation.
