Hello and thank you for your question.
There were two transfers of the property if I understand correctly: once from your uncle to your aunt and once from your aunt to you and Max. The transfer from your uncle to your aunt may have taken place in two steps (partially by gift prior to death and partially through the estate).
Let's start with a discussion of how taxable gains are calculated. A gain/(loss) is the difference between the amount realized on a sale or exchange and your basis in the property sold or exchanged. As an easy example, if you buy something for $5 and sell for $15, you have a $10 taxable gain ($15 realized less $5 cost basis) (IRC 1001).
When you receive a gift of property from someone, your basis in that gift transfers from the person giving the property unless the fair value of the property at the time of the gift is less than the transferer's basis. In a case where the fair value of the property is less than the transferer's basis at the time of the gift, then the fair value of the property is used for determining a loss (IRC 1015). Example: I gift a property to you when my basis in the property is $15 and the fair value of the property is $10. You then sell the property for $5. Your loss ends up being $5, which is the difference between the amount realized, $5, and your basis, $10. Note that you did not receive a $15 basis because the fair value was only $10 at the time of the gift and you sold for a loss.
Now lets consider what your basis is when property is acquired through an estate. When property passes through an estate, the beneficiary generally receives a stepped up basis in the property equal to the property's fair value at the time of death (IRC 1014). Example: You receive property from an estate where the fair value of the property at the time of the decedent's death is $10. Your basis in that property is $10.
Now lets apply this stuff to your situation. It sounds like your aunt may have received the entire property when your uncle died, in which case your aunt's basis in the property would be the fair value on the date of your uncle's death. If your aunt received half of the property by gift and the other half as a part of the estate, then her basis would be that which resulted from the gift plus half of the property's fair value at the time of death. From here, your aunt gifted the property to you and Max, so the gift rules apply. If your aunt's basis was greater than the fair value at the time of the gift, then your and Max's basis becomes the $160,000 presumed fair value, or $80,000 each. If your aunt's basis was less than $160,000 at the time of the gift, then you and Max would each receive a basis in the property equal to half of your aunt's basis.
The American Taxpayer Relief Act of 2012 was signed into law on January 2, 2013. The Act extended the 0% tax rate on capital gains for people in the first two tax brackets. For those with income exceeding the second tax bracket, gains are (partially) taxed at 15%. Finally, if you have income in excess of $400,000 single / $450,000 joint, then you could end up paying 20%.
I hope this is helpful. It sounds like you may not owe any tax at all with the stepped up basis and the 0% capital gains rate!
Sorry I did get to read your reply immediately, had a family crisis. Let me help you understand the progression of ownership beginning about 1950. My uncle (by marriage to my aunt) acquire the property partly by a gift to him by his father. My uncle was one of nine living children, and there was one grandson, a descendant of a deceased tenth son. My uncles father gave one twentith to each of the children and grandchild and the remaining one half to his wife. After the fathers death his wife willed her one to my uncle for his care of her following her husbands death. She also ask the other nine recipients to give my uncle their one twentith. Six of them did and three held one. thats how my uncle acquired seventeen twentith. that all happened around 1950. Incidently My aunt and uncle were married and the time. All 17/20th past to my aunt after my uncle's death in 1992. My aunt gifted Max and I the 17/20th by quit claim deed in11/ 2000 and later died in 9/2001. Incidently my wife and I have an income that is social security based at about $24,000 per year. My brother does a little better , I am guessing $30 to 35K mainly social security based and some small 401K income.
That is great news. Specifically, this: "All 17/20th past to my aunt after my uncle's death in 1992."
You are saying that your aunt receives a stepped up basis in the property, per IRC 1014, because she received her entire 17/20th interest in the property through the estate. Your aunt's basis in the property becomes the fair market value of the property as of the date of your uncle's death. Prior ownership becomes irrelevant.
From here, apply the gift rules noted in the above answer to figure out what your and Max's basis is. Easy-does-it.
Again, I hope this is helpful. Also, it sounds as though your tax on this may actually be $0 with the 0% capital gains rates (originally part of the Bush tax cuts, see above). I hope that is the case after all the dust settles!