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<p>I don't know how you make a gift of $20k of equity. It needs to
be a percentage ownership in the property to be understandable if
not enforceable. I presume the percentage would equal
approximately $20,000 in value.</p>
<p>As others have explained, there's ordinarily no income tax due
but the grantee's basis would be the same as the grantor's basis.</p>
<p>So if Grantor had a piece of property worth $200,000 that they
paid $100,000 for, the grantor would grant a 10% interest in the
property (worth $20,000) and the grantee's basis would be
$10,000. If they later sold for $25,000 they would have a $15,000
gain.<br>
</p>
<p>Not sure exactly how it would work if the property were
encumbered. Let's assume a $1,000,000 piece of property that the
grantor paid $500,000 for and owes $800,000, so that a 10% gift
would still be worth $20,000. But the grantor's basis in that 10%
would seemingly be worth $50,000. That makes less sense, because
it would get around the gift tax reporting limitations, and would
cause me to contact a tax attorney.<br>
</p>
<pre class="moz-signature" cols="72">Kary L. Krismer
206 723-2148</pre>
<div class="moz-cite-prefix">On 4/20/2021 4:56 PM, Craig Blackmon
wrote:<br>
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<div dir="ltr">'Mates, seller gifts $20k in equity to buyer. Does
the seller owe capital gains tax on that $20k?
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<div>Thanks for any insight you can provide.</div>
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