@curiousminds wrote:
I agree it sounds like the regs are in understanding of our position but the regs don’t tell you how to properly file your taxes so that the seller doesn’t end up paying capital gains on the gains in addition to their gift of equity.
This thread is both ridiculously long and idiotically old (probably 3-5 years old since the thread migrated from an old TurboTax board). Moreover, there are at least four different fact patterns posed by different users (is it any wonder why there is confusion here?).
Regardless, a seller does not include the value of the gift in the seller's gain/loss calculation. For example, if the sales price is $100,000 to a related party, the seller's adjusted basis is $50,000, and the FMV of the property is $125,000, then the seller has made a gift of $25,000 and the seller's gain is $50,000 ($100,000 amount realized less adjusted basis of $50,000). The $25,000 gift does not factor into the seller's gain/loss computation.
