My mother who is 85 years old is selling her home she has lived in for over 45 years.

Question

it was purchased for $33,000 and is selling for $420,000.  In February of this year, she purchased a condo with my husband and I for $410,000.  Her name is on the loan but it wasn't on the title.  So we did a Quit Claim Deed to put her name on the title.  She will be living in the condo by herself and it will be in her name only. My question is will she have to pay capital gains tax since she reinvested her money in a house but it was 8 months before she sold hers - but in the same tax year.   
She will be paying off the loan $379,000 after her house closes 11/15.

Nina Whitehurst · Answer

There USED to be a rule allowing taxpayers to defer capital gain on the sale of a house by purchasing a more expensive house within two years.  That rule was repealed in 1997.  So the purchase of the condo makes no difference. 
 
The new rule allows single taxpayers to permanently avoid paying tax on up to $250,000 of gain if they lived in and owned the house at least two of the last five years.  Because your mom had more than $250,000 in capital gains, it looks like she will have some capital gains tax to pay on the excess capital gain. 
 
However, if she and her late husband lived in and owned the home for at least two of the last five years, so might be able to avoid tax on all of the capital gain ($500,000 being the limit for a married couple). 
 
This is all based on federal law.  States have capital gains tax laws, too.  Some follow federal and some do not.  It sounds like your mom bought this house before 2009 (when the law changed in Colorado) and would qualify to subtract this capital gain on her state tax return, so she probably won't incur a state tax on top of the federal tax, but she should verify this with her tax preparer.

Q: My mother who is 85 years old is selling her home she has lived in for over 45 years.