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@Gotaxes wrote:

I was trying to research and figure out the issue of adding the gift of equity to the cost basis of the seller. I had never done that but was advised that "this is what is done."

The gift of equity is on the settlement statement as a cost to the seller in expenses.

 

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Does the closing papers show a selling price of $135,000 and then subtracts the $17,000 "Gift of Equity"?

If so, the sales price is $118,000.

However, there is no deductible loss for the part-sale/part-gift situation because the selling price was less than their Adjusted Basis.

See §1.1001-1(e).

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