More information is needed. If your father
left the house to your mom (and she was not already co-owner), her cost basis
is the fair market value of the property on the date of your father’s death.
Her cost basis is not your father’s cost basis. So, the $560,000 purchase
price, $20,000 upkeep, and $240,000 mortgage balance are not relevant.
If your mother continued to rent the property
during the three years she owned it, there is depreciation recapture to deal
with.
The simple answer to your question is that
the person in the lower tax bracket should be the one selling the property, if
sold at a profit. So, she should , most likely, sell it and give you the money.
