To add to @ rferreira 1 's answer - the sale has no direct tax consequences to you because neither of you owned the house. The capital gain goes entirely onto the mother-in-law's tax return.
How you and your wife handle that is between you and your mother-in-law. From what you posted, it sounds like she is only getting back her initial investment and paying a large tax bill (because she didn't live in the house and therefore has no capital gains exemption). How you and the mother-in-law feel about the fairness of that will dictate how you all decide to sort out the profits, but that's really up to you.
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