Q: Will I need to claim the difference as capital gains?
A: Yes.
Q: Are there any adjustments such as the selling price minus fair market value instead of what mom sold it to us for...etc?
A: No. This only occurs when property is inherited.
Q: Could we avoid the capital gains tax if we rolled the proceeds over to our current home mortgage?
A: No.
Q: We live in Iowa - will we have to pay state taxes as well?
A: Yes. The only exception in Iowa is that net capital gains from the sale of real property used in a business are excluded from net income on the Iowa return of the owner of a business to the extent that the owner had held the real property in the business for ten or more years and had materially participated in the business for at least ten years.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
