Again, the basic formula is simply:
Sales price (less selling expenses) LESS Adjusted basis = gain (loss) on the sale.
In your case, the basis is the fair market value on the date of death. The mortgage balance is irrelevant and does not factor into the equation.
@TimHedrick wrote:
......not the portion that remains owned by the bank
Note that the bank owned nothing; the bank merely had a lien on the property prior to the date the mortgage was paid off.
