I inherited a house that had a mortgage. I recently sold that house for less than the appraised value at death. Will I owe capital gains tax if mortgage was not mine?

[PatriciaV · Accepted solution]

It depends. If you owned the home for at least a year and sold it for less than your inherited basis (Fair Market Value on the date of death), you would have a Capital Loss. If you sold it for more than your basis, you would have a Capital Gain.

The existence of a mortgage on the property is not a factor in the tax treatment of the sale. This is true even if paying off the mortgage caused you to lose money on the sale.

[sheri414]

This is not totally true.  It doesn't matter the holding period.  Sale of inherited property is always long term, even if not held for a full year.  You can inherit today and sell tomorrow and the gain/loss is long-term.

[JAC2BE]

You are wrong.  The proceeds of an inherited house sold within 36 weeks is SHORT-TERM capital gain