Sale of Rental Home to Family Member with Gift Equity

[jcareyon]

How do we report the sale of our rental home to a family member for their principal residence?  Time of ownership: 5 1/2 years.  Gross proceeds on 1099-S = $700,000, Selling price = $700,000, Gift Equity = $265,000, Buyer Purchase Price = $435,000,  Cost Basis = $480,000.  How do we fill out the tax return and what is our capital gain as sellers?  What is the cost basis for the buyer?

[Anonymous_]

Old thread but the answer is in the Code:

https://www.law.cornell.edu/cfr/text/26/1.1015-4