The home we sold to our son and his wife was not our main home, it was an investment property we purchased and remodeled. With our 'gift of equity' our son/wife were able to avoid bringing any cash to the closing - for down payment and closing costs, etc. We received a 1099-S from the lender for $187,000. Will the $13K be subject to capital gains tax on our tax return, or does the gift of equity in any way add to our cost basis in the property sold?
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Despite the 1099-S, your sales price was $174,000. Your son's cost basis is also $174,000. The $13,000 is not a capital gain. It is just a gift.
Despite the 1099-S, your sales price was $174,000. Your son's cost basis is also $174,000. The $13,000 is not a capital gain. It is just a gift.
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