1) So from what I understand there is no standard method to report Gift of Equity on a home sale and you have to adjust the number and either IRS accepts it or contacts you and you show them the gift to plead your case?

2) Does IRS typically accept the gift of equity as a reduction in proceeds? 

3) Is the simplest method to add the gift as an "other increases to basis" entry on the Adjusted Basis of Home Worksheet?