@ImOverTaxes that is what I meant in my reply but please note :
(a) because you were/are a resident of a community property state, at the time of passing of your spouse , the step-up is on 100% of the property and not limited to 50% or ONLY the share of the departed
(b) the gain at the time of sale is Sales Proceeds ( Sales Price LESS sales expenses such sales commission, transfer tax , preparation costs strictly for sales purposes etc.. etc. ) LESS accumulated depreciation ( in your case sum of all the depreciation included / recognized for the business deductions in the past ) LESS your basis in the property ( already covered earlier ).
(c) the accumulated depreciation ( if you did not take the standard per sq. ft deduction for business use of home) equivalent of the gain is treated as ordinary gain and taxed at your marginal rate
(d) the rest of the gain is treated as capital gain and is eligible for exclusion because this was your main home ( to the max of $250,000 for a single filer as long as you meet the conditions earlier listed ).
Is there more I can do for you ?
