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Sale of property to relative

kabbabkkg
Level 2

I have a client that had bought a home and updated the home then sold to his son.  He original was going to rent the property but decided to sell.  The property sold for 180,000 and on the doc it says due from Sellar at closing 131,213.18.  Which includes closing cost, payoff of mortgage loan, gift of equity and seller credit.  Is any of that an expense on the return for the seller.  This is the first I have run into this so need some feed back.

 

thank you

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4 Replies 4
qbteachmt
Level 15

Don't confuse Money and Expense.

"Due From" is the money. You have to look at the closing statement and identify which things are Expense, the same as any other exercise.

For instance, Mortgage payment Principal is not Expense. Interest payment is expense. Final tax amounts would be expense. Commission to the selling broker, if one was used, is expense.

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Skylane
Level 8
Level 8

Keep it simple. The sales price is 180k Everything else is adjustment to basis. 

BobKamman
Level 14

Your question is whether the "gift of equity" is included in the selling price.  It shouldn't be, but did the escrow company report the $180K on Form 1099-S?  If so, count it as a selling expense -- along with the "seller credit."

qbteachmt
Level 15

"Everything else is adjustment to basis"

Not the mortgage payoff; but yes to the improvements as well as original purchase.

"Your question is whether the "gift of equity" is included in the selling price."

Ooh, mind-reading...

Honestly, it would help us to have some details @kabbabkkg regarding the amount of that gift of equity. Are you aware of the Gift rules?

Example:

https://www.investopedia.com/terms/g/gift_of_equity.asp

 

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