@Andrewhickam
Was the house, that was sold, your father-in-laws primary residence? If so, was the gain more than the exclusion amount? Did he report the sale, as a home sale, and claim the exclusion, on his tax return for the year sold? If not his home, did he pay tax on the gain in the year it was sold? That is, has the taxable part of the gain already been accounted for?
If not, was it his intent to pass the tax obligation to you, both capital gains and mortgage interest. The insurance payments are not deductible and the real estate tax is only deductible as an itemized deduction.
Is there an amortization schedule with the buyer? That is how much of the money you received is interest and principal.
Even if you go to a tax professional, you need to have answers to theses questions.
