My husband and I live in Virginia. He and his brother inherited their parents’ house in California free and clear, borrowed $40K for upgrades/repairs (which we are still paying off), then rented it out for 8 years. His brother died recently and his widow wants to sell the house. They expect to sell it for $300K, and will split the proceeds equally. We would like to take the money and pay down the mortgage on our primary residence. Our combined income is around $170K. Will we need to pay capital gains if we do this or reinvest it in some way? Is there any way to avoid paying them?