ANSWERS: 2
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You can take the full $500K deduction. Since her death took place this year, the IRS views this as a full year for capital gains purposes. Not sure about the next year part.
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(I asked the question) I found IRS information that says that the determining factor is filing a joint return; I believe I can file a joint return this year, but not next year, so this year the exemption is $500K but next year and thereafter it is $250K.
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