Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.Your wife inherited the property (her share) at fairmarket value on the date of death of her father, so did the sibs.When they gave her their portion she retained their value.This means that the fair market value of the house is her cost. She would only pay tax on the difference in cost and sale price.
Any improvements made before sale would have increased her cost. The fact that you purchased a condo with proceeds does not factor into any portion.
It is likely that she may see a small loss on the sale.
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