Form 709 gift of equity

[RBThompson]

I'm not sure how to fill out Form 709 Schedule A, column (e) Donor's adjusted basis of gift and column (g) Value at date of gift. I sold my house to my daughter and son-in-law. The contract price was $850,000. However, I told them I was giving them a gift of equity of $350,000. They got a mortgage for $400,000 and paid $100,000 cash. Their appraisal valued my house at $970,000. My adjusted basis in the property at the time of the sale was $598,441. So, do I calculate 970,000 minus 500,000, which equals $470,000, and after the $18,000 annual gift exclusion for each donee, that means I made gifts of equity totaling $434,000. I think that makes sense to me. But what do I use as the donor's adjusted basis for each of the gifts? Is it the adjusted basis for the house or just a portion of the house? I'm confused because it isn't the entire property that I gifted. 

[Hi Palms]

You're going to have to allocate part of the basis to each donee.

[RBThompson]

So I'm assuming the gift is the difference between the fair market value of the property (not the amount on the contract) and the amount I actually received. That would be $470,000, or $235,000 for each donee. Then I have to subtract the exclusion of $18,000 from each. That leaves a gift of $217,000, which is the adjusted basis of gift per donee (column e), correct? And that same figure would be the value at the date of the gift (column g). Is that right? 

[Hi Palms]

You're correct but watch where you subtract the annual exclusion (the $18k per donee). That's in the computation part of Schedule A.