DEAR BOB: I have a negative amortization mortgage on my rental property. I pay only the minimum required monthly payment, which doesn't even cover the full interest payments, so my mortgage balance keeps growing. When I sell or do an Internal Revenue Code 1031 tax-deferred exchange, how will my capital gains be calculated? Will the interest I didn't pay affect the calculation of my capital gain? – Hazel O. DEAR HAZEL: No. Your mortgage balance has absolutely nothing to do with your capital gain when selling real estate. The capital gain is the difference between your adjusted cost basis and your adjusted sales price. Purchase Bob Bruss reports online. The adjusted cost basis is your purchase price, plus most closing costs that were not deductible at the time of purchase, such as tran...
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