When selling real estate and computing capital gains, is the realized amount the check you get at the closing which is after mortgage payoff? Or the sale price?

[JasonSenior]

In other words, when computing your profit on the sale, does the mortgage payoff count as a reduction in the sales price?

[DoninGA · Accepted solution]

No, the mortgage payoff is not part of the calculation for a gain or loss on the sale.

Gain or Loss = Sales Price minus Sales Expenses minus Adjusted Basis (Purchase Price plus the cost of improvements prior to the sale)

[VolvoGirl · Accepted solution]

No, the mortgage and proceeds you get does not figure into it.  Your net profit is Sales price minus cost/purchase.  

[francster]

what I can find in Publication 523 in that the Sales Price is everything You receive for selling you home. So it is the amount after the mortgage payoff is removed.

[SusanY1]

You also "receive" the amount that goes toward the mortgage payment as well, it is just then immediately transferred to the mortgage company for payoff.  

The reportable amount used in the gain calculation is the amount before the mortgage payoff is made.  The amount of mortgage taken out to purchase the home is, however, considered part of the "basis" for the transaction.