if you sold at FMV and assuming "we" is you and your spouse
tax basis will be the 475K minus the principal payments they have made against the loan? this assumes you did not use the installment method for reporting the gain
1) you can only use the home sale exclusion once every 2 years.
2) both owners must occupy the house as their principal residence for 2 out of 5 years before the sale. only one needs to be the owner for that period
