I purchased a property in 2020 to hold the mortgage for my son until he could obtain a mortgage. After 23.5 months (May 2023) he was able to get a mortgage. The purchase price I paid was $305,000. I was planning to sell it to him for $305,000, but to avoid PMI he asked (at the suggestion of the mortgage broker) for the price to be set at $404,000 and give him a gift of equity. So I agreed, and gave him a $90,000 gift of equity and then also a $9000 credit at closing. So he paid $305,000 ($404,000 - $90,000 - $9000) for the property. With the closing costs that I paid, I came out with a loss. However, the 1099S indicates the proceeds were $404,000. Can the gift of equity and the closing credit be used to reduce my capital gains to zero or even partially?
