House was paid off. Then mortgage was taken out for $300,000 5 years ago. Sold house for $410,000 in 2016. I shouldn't have to pay capital gains since profit is $110,000?

Forum|Forum|7 years ago
June 6, 2019
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My mother paid off her house after my father passed away. 7 years ago she took on a new mortgage of $300,000. She sold her house in 2016 for $410,000. She shouldn't have to pay capital gains tax since the profit is under $250,000 or is the profit different when she took out a new loan on the house? She lived in the house more than 5 years and its located in California.

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The mortgage has nothing to do with a gain or loss on property. You would compare the original purchase price plus improvements with the sales price to determine gain. If there is $250,000 gain or less using that formula, she does not have to include the gain, unless it was used as rental property at some point or she received a 1099-S.

Anonymous

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Anonymous

My father passed away in 2000, so could we apply what is quoted below from the TTLC forum:

"Surviving spouse. If you are a surviving spouse and you owned your home jointly, your basis in the home will change. The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). The basis in your interest will remain the same. Your new basis in the home is the total of these two amounts. If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home.

Example. Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value)."

Does that mean if my parents bought the house in 1979 for $80,000, and when my father passed away in 2000 the fair market value of the house was $240,000, so the new total basis would be $160,000? Do I put this amount in the software section: "Sale of Home (gain or loss) / Tell Us About the Purchase of Your Home / Adjusted Cost Basis" under the Wages and Income tab? Thank you for your support.