Your gain is the difference between the selling price and the purchase price. For example, if you bought the house for $100,000 and he sold it for $300,000, you have a gain of $200,000.
It doesn’t matter what your sales proceeds are. suppose you bought the house with cash, then your proceeds are $300,000, $200,000 is the capital gain. Suppose you refinanced your mortgage for $290,000 last year so that your sales proceeds are only $10,000. Your gain is still $200,000, you just cashed most of it out early.
You must report your gain in the year you sell your home. You can’t postpone the gain by buying a new home. That tax provision was eliminated about 1996. If this is business property, you can sometimes do a like kind exchange, but I can’t go into that now.
If this was your personal home where you lived, the gain may not be taxable. If you didn’t live there, or you don’t meet the minimum requirements, then you will pay tax on your gain amount.
