Settlement Statement

On the settlement statement under reductions due seller, there is an item "GIFT OF EQUITY" in the amount of $34000.+. My understanding is this is an amount the seller is reducing the sale price for a relative. The actual sale price is increased by this amount and I'm sure the house must have appraised for enough, but is this going to be able to be written off for income tax purposes? It is not a selling expense nor can it be added to the basis. The owners have lived in the house 1 yr., therefore does not qualify for the exclusion. This is Georgia.
Any help will be greatly appreciated. Please reply ASAP if anyone has an answer or an opinion.

I believe some people use the device of a “gift of equity” because of certain financing rules, but it has no actual economic effect and is therefore not a factor in determining the tax aspects of the transaction. The basis for income tax purposes of the buyer is the actual sale price plus any other actual costs of acquiring the property.