my stepmothers mother passed away leaving my step mother the executor of her estate. included is a home valued at 190,000. she want to sell the home to me and my girl friend for 150,000 and gift the rest of the equity to us. she is fine with paying the taxes on the 150,000 but doesn't want to pay the added tax on the 40,000 gift of equity. My first question is would this fall under capital gains tax? second, is there anything we can do to avoid paying the tax on the gift of equity? As a last resort I thought she may be able to deed the house to me and then we could "refinance" the home and pay her that way. would this avoid the taxes? any advice is appreciated