How do I report the gift of equity in the sale of residence. I understand I will have to file a gift tax return, but I am not sure how to report it on 1040.

Forum|Forum|6 years ago
December 7, 2019
3 replies
27 views

My client sold their house to their granddaughter for 325,000 and gifted her 81,250 as gift of equity. Do I use that amount as a expense of sale or not?

ProSeries Professional

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Best answer by rbynaker

Here's the other thread:

https://accountants-community.intuit.com/questions/1527620

Which leads you to Reg 1.1015-4:

https://www.law.cornell.edu/cfr/text/26/1.1015-4

Rick

rbynakerAnswer

Level 13

Here's the other thread:

https://accountants-community.intuit.com/questions/1527620

Which leads you to Reg 1.1015-4:

https://www.law.cornell.edu/cfr/text/26/1.1015-4

Rick

caroljoAuthor

Level 5

Thank you all very much for your time.

abctax55

Level 15

"or not?"

Not. Gifting to a relative is not deductible (unless that relative is a not-for-profit).

HumanKind... Be Both

M

Marc-TaxMan

Level 7

IRS considers it 2 transactions: part sale (with proportional basis); part gift with carryover basis.

Assuming full value is $320,000 IRS considers approx 75% to be a sale (of 75% of their basis) and 25% to be a gift.

The 75% purchased gets new basis to purchaser; the 25% gift gets carryover basis to donee.

abctax55

Level 15

Good answer - I read the question *they sold the house, gave her cash*.
I really shouldn't answer questions until all the coffee is on board

HumanKind... Be Both

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