Hello smirnoff
Thank you for your question.
to calculate your capital gains, you are allowed to increase your basis by the cost of improvements you made to the property.
In view of the above your basis in property roughly will translate to
65K (130K *your 50% share)
+50K Improvements (- sorry boat does not count towards basis of cottage. if you gave away the boat in the price the you can apportion the selling price between cottage and boat)
Since you sold the cottage for 125K
You will be liable to pay taxes of the difference between net selling price of your share ( sale price less any expenses directly related to the sale) and your basis.
Hope this answers your question,
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