Here is the situation - Sometime in the mid-70's my mother purchased a home for roughly $45,000. In the Spring of 2003 I refinanced the house by taking out a $75,000 loan to pay off the existing mortgage and other debt. Originally, I remember my mother gifting the property to me outright, then, for insurance purposes, I immediately deeded it back to her. The deed indicates that we hold the property "not as tenants in common but with rights of survivorship." At the time the of the refinance, the house appraised at approximately $175,000. Our understanding, although not memorialized, was that if the property was ever sold, I would have a zero percent interest in the proceeds. The proceeds for the sale were always intended to go towards my mother's retirement housing. However, because of my mother's poor credit, I was the sole mortgagee. I took the property tax and mortgage interest deduction for the 2003 - 2006 tax years. On February 12, my mother passed away and the title passed to me. We intend to sell the property for $250,000. Once the mortgage is paid off (balance of $70,000) there will be a profit of $180,000.

The question is - what is my basis for reporting the income from the sale of the house? I thought I read somewhere that I have a step up basis of the FMV at the time of acquisition but I'm not sure.

This is a great time to consult a tax professional. If you had inherited the house from your mother's estate, then the stepped-up value is the value on the date of your mother's death less any expenses associated with the sale. Jointly titled with a right of survivorship, I am assuming you have avoided probate; in this case you will likely get a stepped up value on your late mother's half. Whatever the case, you will want to clear your title before selling the home by providing a death certificate and affadavit of survivorship.

Hey, welcome to the Pool and condolences on your loss.