clydewolf

Rj Smith,

The amount you owed on the property is not relevant to your capital gain/loss.
This is a complicated calculation and I suggest you sit down with at tax professional to determine your gain or loss on the property.

When you bought the property you had a basis equal to what you paid for the rental property. And then you may have made some improvements in the property that would increase your basis. Next you have depreciation that you have taken or should have taken, that takes away from your basis. You may have had a casualty loss that reduces the basis. When these factors are considered you arrive at an adjusted basis, your investment in the property.

When you sold the property for some amount, you subtract your adjusted basis from the sale price. The amount of your gain that equals your depreciation is ordinary income. Any gain beyond that may be capital gain.

You need to get with a tax professional and sort out your adjsuted basis for the property you sold.