Each year I get a new first; some of which make me want to cry - some just make my head numb...especially with so many returns to do.

So this is the scenario... 

• TP and spouse were deeded a home at no cost to them by his mother. 
• TP sells home to nephew for $100K 
• TP received 1099-S for $100K
• At closing, proceeds were distributed to seller (TP) as follows:
  • Mortgage pay off  (still in mother's name) - $46,522
  • Seller credit  - $700
  • Closing Costs - $735
  • Taxes - $18
  • Gift of equity - $36,496
  • Net to seller - $15,529

My questions - 

• When reporting the sale of the home, do I reduce the sale price by the gift of equity and the mortgage payoff, or just the gift of equity?
• If the mortgage was still in the mother's name, would that be an expense?
• If the above is correct, what's the workaround if the 1099 was issued for the full sales price?

I'm also preparing a 709 since the gift of equity is over the limit by $2496. Is this correct as well?

As always, your input and assistance is MORE than greatly appreciated!