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parvitstax
Level 6
April 2, 2025
Question

Gift of Equity on home sale

  • April 2, 2025
  • 1 reply
  • 14 views

Home Sale : $430k on 1099-S

Seller's Cost Basis : $150k

Gift of Equity : $170k 

 

Is the gift of equity an increase to the Seller's Basis? $320k total - $430k = $110k gain? I've read a handful of posts already and still remain confused how this could affect cost basis (if at all). 

This topic has been closed for replies.

1 reply

sjrcpa
sjrcpa
Level 15
April 2, 2025

No. Their basis is what it is.

The fact that they are selling below market, by making a gift of equity, doesn't change that.

But you have part sale and part gift and potential gift tax returns to file.

The more I know the more I don’t know.
    P
    parvitstaxAuthor
    Level 6
    April 2, 2025

    So the seller still has to pay tax on their full gains (minus any exclusion) and when the new owner sells they have to reduce their cost basis by the gift of equity amount? 

    sjrcpa
    sjrcpa
    Level 15
    April 2, 2025

    Research the tax treatment of a part sale, part gift transaction.

    Buyer/donee gets the donor's basis for the gift part they received.

    The more I know the more I don’t know.
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