Under Internal Revenue Code Section 1041, transfers of property between spouses during a divorce, or former spouses incident to a divorce, are generally treated as non-taxable events. This means that the receiving spouse often takes on the carryover basis of the transferring spouse. In simpler terms, they inherit the original cost basis of the property.
so the tax basis is $25,000 + $150,000 + any improvements done.
$490K is the selling price
closing costs such as realtor fees and other costs like transfer taxes are selling expenses.
it would seem your mom owned and occupied the property as her principal residence for 2 out of the 5 years before the sale. Thus she can exclude $250K (home sale exclusion) of the gain from taxation
In Turbotax use the home sale worksheet.
how this affects her taxes is unknown the gain is on top of other taxable income and it could make more of her Social Security taxable.
the best way to find out what her taxes would be is for her return to be prepared.
