Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.
Thank you for your question. I'm sorry too hear about your loss. Okay. Let's take a look at your situation - you inherited an interest in house. When you inherit the house, your basis is the fair market value of the house on the date of your mother's death, or the fair market value six months after the date of death (if an alternate valuation date is selected by the executor of the estate). In six months, the value of a house typically in a normal market won't change much.
Your basis is the amount you will never pay capital gains tax on. If you sell the house for more than the basis, you will pay capital gains tax on the amount that the sales price exceeds the basis.
Now, your repairs INCREASE your basis - so add that to the fair market value. You will not pay capital gains tax on this money, either.
For example, if you sold a house for $200,000 and the fair market value at the date of death was $150,000 and you did $40,000 in repairs, you would only pay capital gains tax on $10,000.
Capital gains is 15% until the end of 2012, and then it increases to 20% in 2013.
I hope this helps you, please let me know if you need further assistance.
** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**