It was a loss even without consideration of gift of equity.

Sale price on 1099S:  $135,000

FMV per appraisal:  $170,000

Gift of equity $17,000

If gift of equity is added to adjusted cost basis: $170,000 + expenses to sell of $1176 + gift of equity $17,000 = $188,176 less $1099S $135,000 = $53176.

Without the gift of equity added to cost basis: $170,000 + $1176 = $171,176 less sale price of $135,000 = $36,176 loss.

Cost to sell: $