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Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 11143
Experience:  Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
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My wife inherited ahouse free & clear, if she sells it and

Customer Question

my wife inherited ahouse free & clear, if she sells it and puts the money towards our mortgage is there acapital gains tax on the money. we are both retired.
JA: I love the idea of making big money with investments, but there are so many things that could go wrong. The Accountant will be able to help you. Please tell me more, so we can help you best.
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Submitted: 5 months ago.
Category: Capital Gains and Losses
Expert:  Lane replied 5 months ago.

Hi. My name's Lane. I can help you here.

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First, Capital gain = Sales price - basis

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Normally, basis is your investment IN the asset (for real property, purchase price plus improvements)

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But when an asset is inherited, the heir receives what's called a "step-up" in basis to the Fair Market Value of property as of the date of death of the person leaving the asset.

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So, when someone in this situation sells the property fairly quickly (within an year or so before property price would have had time to rise), there IS no gain (actually when adding the selling costs to the basis, this many times generates a small loss_

Expert:  Lane replied 5 months ago.

By the way, since the tax law change of 2001, there is no requirement to roll dollars into another property, and the any mortgage (although a way to FINANCE a purchase) doesn't come into play in the capital gain calculation. (Capital gains = sales price - basis)

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Please let me know if you have any questions at all, before rating me.

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And if you DON'T have other questions Your positive rating … (by using those the stars or faces on your screen, and then clicking “submit”) …would be appreciated!

Otherwise I receive no compensation for the work.

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Thank you,

Lane

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I hold a law degree, with concentration in Tax Law, Estate law & Corporate law, a Master’s Degree, with specialization in financial accounting & tax, a BBA, and CFP & CRPS designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice, since 1986…

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