@curiousminds Chew on this hypothetical and see if it makes any sense to you.
Here is a modification of your set of facts:
You paid $150,000,000 for your house.
The house appraised at $200,000,000
You sold the house for $175,000,000
Gift of equity was $25,000,000
Now, according to you, as well as your law firm (closing agent or whomever), you have a $25,000,000 capital gain on which you will be taxed. Further, you will also have made a $25,000,000 gift on which you will owe gift tax (at the top marginal rate of 40%).
