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My father passed away a month ago. My mother is getting life

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insurance from him passing away...
My father passed away a month ago. My mother is getting life insurance from him passing away. She wants to pay off the mortgage with the life insurance. My sisters say that she would have to pay penalties is she decides to sell the house. I know about the capital games law if you sell your household under 2 years of owning it. I am not sure about paying taxes after selling the house when a widow is involved.
Submitted: 8 years ago.Category: Tax
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Answered in 21 minutes by:
7/1/2009
Tax Professional: Lev, Tax Advisor replied 8 years ago
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,134
Experience: Taxes, Immigration, Labor Relations
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Sorry for your loss...

When you sell a property - the capital gain is determined as (selling price) - (basis)

The basis is generally a purchase price adjusted by some improvement expenses.

If the property was inherited - as in your situation - there will be stepped up basis - that is a fair market value of the property on the day the decedent died.

 

Assuming your father and mother owned the property jointly - the basis of the inherited half will be a fair market value, but the basis on the half your mother owned - would be a purchase price.

As your mother will sell the property - assuming she owned it and used as a primary residence at least two years from the last five before the sale - she will be able to exclude the gain from taxable income - up to $250,000 for single and up to $500,000 if she file a joint tax return in 2009.

 

Let me know if you need any help.

 

Lev
Lev, Tax Advisor
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