There is no inheritance tax given the value of the estate.

My question is do I need to use all of the equity towards the down payment of the property, to avoid capital gains tax? 

There was an opportunity to help a fellow investor who had his family growing and needed to dispose of the property to get rid of problematic tenant issues, rising taxes, and invest in other opportunities closer to home.

Also make sure your tax basis is reduced as part of the sale since your land is being reduced. 

Never let the tax tail wag the dog.

You should look at any limitations on gift taxes though, and she may actually want to structure it around any of this.

An accountant would help here, as you can make gifts to family members every year to a certain amount tax-free.Finally, you could simply sign over the dead to your son, if you trust him to pay you back over time.

The seller wants to sell it for $50k but has requested to put it down on paper for $5k, so he can pay less tax; the remaining $45k would just be given under the table. 

At 25% down I’m looking at roughly $2300 for principal, insurance, and taxes per month on a 30 year loan at 7.6%. 

Purchased for kids future/college fund (maybe relevant maybe not) Mortgage rate is 4.4% currently paying $1149 a month (including taxes/Insurance)Currently rents for $1550 (room for upping rent to $1600+)In the 2 years Ive had it, Ive added a roof(insurance claim),new windows, new bathroom, plumbing.