@curiousminds wrote:
I do want to reiterate that in these transactions what is happening is, the home's purchase price is still $200,000.....
No, it is not. The purchase price is $175,000 and, in the hypothetical set forth in the post above, the 1099-S should reflect that price, not the $200,000 fair market value; $175,000 is what the parents are receiving (gross proceeds).
See https://www.irs.gov/instructions/i1099s#idm140083296860480 (gross proceeds)
