Rental sold to daughter at a deep discount

[cjlcpa]

A client sold her rental home to her daughter last year. On the sale document it shows the sale price was $330k, so 1099S was issued for this amount. She gave her daughter a gift of equity of $164k effectively cutting the price in half, this also shows on the closing documents. How is it best to show this on the Mom's return? Increase basis? Increase selling expenses?

It is also looking like there will be a loss on the property in the end. Assuming this will be nondeductible since the gift caused the loss.

We will be filing a gift tax return, of course, for this gift.

The $330k selling price is about what the county assesses the property for.

Any thoughts would be helpful, thanks in advance.
Carrie

[cjlcpa]

Has everyone properly dealt with all issues related to prior depreciation of the rental property?

FE

Yes, that will be part of the sale gain/loss calculation. The adjusted basis will be roughly $225k. Sec 1250 recapture is about $25k. Selling price to her daughter is about $165k.

[Lion]

Don't forget related party issues...

[cjlcpa]

Don't forget related party issues...

Yes, thank you. The loss won't be deductible due to that.

Any suggestions on the best way to deal with gift of equity when reporting this on the Mom's return? As an increase to selling expense, increase to basis, or? Attach a statement?

[DonB]

See this recent thread

Yes, thank you. The loss won't be deductible due to that.

Any suggestions on the best way to deal with gift of equity when reporting this on the Mom's return? As an increase to selling expense, increase to basis, or? Attach a statement?

http://forum.thetaxbook.com/showthread.php?28271-Gift-of-Equity

[cjlcpa]

http://forum.thetaxbook.com/showthre...Gift-of-Equity

Thank you Don! I did not see this when I searched.

Carrie