WGN-TV Show Notes August 6, 2002
Q: Recently sold a home that I rented out for 5 years (I don’t qualify for the exemption). However, I had to pay off the mortgage and made only $10,000 on the deal. My question is: Will I have to report the total gain or the gain after paying off the mortgage?
Also, I am now the owner of my father’s home (recently deceased), if I sell his home will I have to pay an inheritance tax on the proceeds or is it
free and clear?
A: You only have to report the true gain: How much you sold the house for minus how much you paid. That will provide you with your true gain. How much your mortgage is for is irrelevant. So, if you had a $10,000 down payment, you may not have any gain at all. Do the numbers and see.
You inherited your father’s house at its current market value the day your dad died. If there were estate taxes owed on his assets, they would have been paid by the estate. So if you sell your dad’s home for the price that it was valued at the day you inherited it, you would owe no capital gains taxes at all on the sale proceeds.
Aug. 6, 2002.