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@rafregault wrote:

According to the closing document they sold it for $450K (FMV),

the settlement statement also has a line called Gift of Equity for $168K ...  and my aunt and uncle were paid out $168K less at closing.

Their basis in their house is purchase price plus improvements totaling $300K.

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The sale price on the 8949/Schedule D is $300K.

The sale price is the actual amount received ($272K), but not less than their Basis ($300K).

See §1.1001-1(e), and the Example 2 in that section.

https://www.law.cornell.edu/cfr/text/26/1.1001-1#e