How to reduce the taxable gain on a home sale

Q: I am selling my Oregon beach home for $525,000. My husband and I purchased it in 1979 for $74,500. He passed away, and I now qualify only for the $250,000 federal income-tax exemption. Where do I start for calculating my cost basis? Do I start from the time we purchased the home - or the home's market value at the time my husband died and I received the property?
B.Z., via e-mail

A: The first place to start for your basis is the settlement sheet from the original purchase of your property, says W. Thomas Curtis, a certified financial planner in Gaithersburg, Md. Your share of the basis for the property will be one-half of the total cost of purchase, including any settlement expenses - except for those like property taxes, interest, and mortgage points that you may have deducted on your 1979 tax return.

The next step is to take one-half of all improvements made to the property from the date of purchase to the date of your husband's death. At your husband's death, you should have had the property appraised, especially if you filed an estate-tax return. If you did not get it appraised, then contact an appraiser to find out what the value of your property was at the date of your husband's death.

You will add one-half of this amount to the amounts you previously computed to find your personal basis. From the date of your husband's death until the date of sale, you'll be able to add 100 percent of any improvements you have made to the property. The sum of all these computations will be your cost basis in the property.

Don't forget to add the selling costs and other settlement expenses from the sale of this property to your basis. Once you do this, you'll determine how much over the $250,000 will be taxable gain, Mr. Curtis says.

Q: Where can I find reliable projections for interest rates, especially mortgage rates?
M.B., via e-mail

A: An excellent website to look at is www.bankrate.com for mortgage information and comparisons, says Nicholas A. Nicolette, a certified financial planner in Sparta, N.J.

To find interest-rate projections,try the Office of Thrift Supervision website (www.ots.treas.gov) and type in "interest rate projection" in the search box. In addition, the website of financial publisher, HSH Associates (www.hsh.com) contains articles on rate forecasts.