@simidave wrote:
In essence she paid me $333,000 for my home by paying that to purchase my mobile home.
That's why I thought the 670,00 minus 333,000 might be the gift portion.
If you want to treat it that way you will need professional advice. I see it as two separate gifts.
If two separate gifts, her cost basis for the home is your cost basis. You should help her document that now and she should save that paperwork as long as she owns the home plus for 6 years after she sells. That will help her minimize her capital gains tax owed.
Then her gift to you of a paid-up mobile home means that your cost basis in the home is whatever her cost basis was. Again, you need to document that for your own tax records.
Treating it as a sale could mean that her cost basis in her new home is $333,000 plus you gave her a gift of the difference. Whether that is better or worse for you both in the long run is something I can't suggest an answer to. The fact that it was a transfer to a related person may also affect the basis determination. And depending on how you worded the various transfer deeds, you might not be allowed to claim it that way at all. Most people aren't audited but even so, I would consider running this past an expert.
