I have a client who has sold a rental property that was never rented and sold it to his son.  The Basis of property is 125,560, sale price is 180,000.  There were 40,000 in upgrades and repairs to property and the taxpayer used a gift equity of 28,000 at the time of the sale.

The 40,000 is added to the basis to increase the basis correct?  The gift equity is the amount of a discount on the sale price and reduce the sales price of the property?  The only other cost is closing costs paid by the seller.

I have been researching this and I just need to know that I am in the right thought process for this return.

thanks