Gift of Equity To Family Member Tax Question

[grlasnier]

In January 2018, I purchased a single-family residence for my son and his family to live in.  I put 10% down and took a mortgage for the rest.  My son rented from me at a Fair Rental Value and I reported it as rental income using Schedule E, claiming depreciation.   In late 2020, my son purchased the home under an arrangement where I gifted the equity and he borrowed enough for me to pay off the existing loan and closing costs.   The Mortgage company issued me a 1099 S for $465,000, an amount approximate to the value of the home (to facilitate his borrowing).  They also had me sign a Gift Equity Letter in the amount of $107,000, which was credited to the Buyer (my son) at closing.  How do I report this using Turbo Tax? Is it reported on Form 4797?   One concern is whether the gross sales price needs to be $465,000 so that IRS can link up the 1099 S.  Or, can I net the gift of equity against it.  

Some have advised reporting this using Form 8949.  I feel like I am in the swamp on this one.  

I know that I also need to report the Gift of Equity on Form 709.  

[MaryM428]

You will enter the sale of the rental property following these steps in TurboTax:

• Search for rental property, then jump to rental property
• Fill in the information un til the screen:  Tell us about the situation this year and pick sold or disposed of property
• At the screen What expenses and assets did you have for jones?  Select Sold Rental property
• Continue with income and expense for 2020

Then search for sale of business property and enter the sale and the expenses of the sale.

You can e-file your return, but you must prepare and file Form 709 separately.  TurboTax does not support Form 709.

IRS Form 709