We're talking mortgages again today, but not the recently popular topics of real estate speculation and bailouts.

Instead, a reader named BJ sent me a question about an elderly woman's mortgage dilemma.

"My dad recently passed away, and he did all the finances," BJ wrote in an e-mail. "My mom is 85 years old. She earns about $8,000 a year from teaching piano. She has about $400,000 in investments ranging from losing 4 percent to earning 4 percent monthly."

BJ's mother receives about $1,200 per month from Social Security and owes about $20,000 on a mortgage with a 5.75 percent interest rate. Her mortgage payments are about $500 per month.

"She has a money market saving account that she draws upon when her monthly expenses exceed $1,200, which they often do," BJ wrote.

"She is inclined to sell off $20,000 worth of her stocks to pay off her mortgage so she will not have that monthly expense and can live more comfortably within her Social Security income. But she is afraid of incurring any adverse tax penalties."

The questions are, what tax issues should BJ's mother be aware of, and is there a tax-smart way to sell some stock and pay the mortgage?

For help with those questions, I contacted fee-only financial adviser Denise Smith, CPA, CPF and owner of Financial Planning Office in Salt Lake City.

Denise says clients often ask whether they should pay off their mortgages or keep them for the tax deduction. There is no strict rule of thumb, she says, but she does have some thoughts on the topic.

Denise says she agrees with BJ's mom's goal of paying off her mortgage.

"More than likely Mom is taking the standard deduction on her tax return, so there is no tax advantage to keeping the mortgage," Denise says. "Also, by paying off the mortgage she is effectively getting a 5.75 percent return on her money," which is pretty good in today's environment.

As for tax issues, Denise says BJ's mom needs to be aware of the cost basis of the stock and capital gains taxes.

"Typically, the cost basis of a stock is the price paid when it was purchased," Denise says. "However, when stock is passed on to a beneficiary, its value is usually more than what it was when the original owner acquired it. The asset therefore receives a step-up in basis, and the beneficiary's capital gains tax is minimized.