Maybe not self employment tax free but fed tax free.Here are some other thoughts:You can gift them up to 15k year to each person (30k total) tax free for you and them from what I know of this.

It cannot be a gift.

It’s a phantom expense that eats your income and shelters from tax.And, looks like it was gifted ?

My mortgage broker had the idea of locking in the 500k with the family, but having them do a 50k gift of equity, leaving me with a 550k loan but being able to pull 50k of that for renovations. 

-Buyer was in the end (along with their agent) inexperienced and didn’t realize they didn’t qualify for a loan with gifted money on an investment property.

You never know when the tides will turn, so take this gift now.Down the road when you are ready to make another purchase, put the high interest loan or credit card loan back on the table as an option to consider with other options. 

For one, that would be a gift in excess of $14,000, which exceeds the annual gift limit. 

I'd take it, after clearly explaining to my friend that she is essentially gifting me her valuable asset. 

@Justin R.Can’t say I’ve had to deal with it personally but gifting or selling a part of a property comes with several implications: how to take title, right of lender to call the loan, right to partition, gift tax, property tax reassessment, capital gains, etc.Also, I’m not sure how accurate that link you attached is with regard to the current law but your 2 bullet summary above seems to leave out some other options.

Heard a funny story once where some first-time buyer was at the tail end of a several month FHA purchase and had a surprise divorce... supposedly the realtor ended up "purchasing" his swing-set for $3,500 to get him over the bar for required funds, and had to supply the bank with a notarized letter of purchase so they wouldn't write the deposit off as an un-seasoned gift.