How should I treat a gift of equity that shows up on a closing statement?

[ironmom]

A client gifted equity to his granddaughter.  I believe I need to do a gift tax return for that amount, but can I then subtract the gift from the sale?

[TaxGuyBill · Accepted solution]

Yes.

For example, if the paperwork shows a $200,000 sale price with a $50,000 Gift of Equity, in reality the sale price was only $150,000.  So use $150,000 as the sale price (if there is a 1099-S, you might need to get creative), and the Gift Tax return would show a $50,000 gift.

[ironmom]

Thanks so very much:)

[sjrcpa]

And if the sale results in a loss it is not allowable due to related party tules.