If your wife is a US citizen or permanent resident (therefore a US Taxpayer) then she must report and pay tax on all her world-wide income.
In this case, she has a long term capital gain, for the sale of property. The amount of the gain is the difference between her adjusted cost basis and the sales proceeds.
For sales proceeds, take the sales price and subtract any costs of selling, like legal fees, deed transfer fees, inspections, or real estate commissions. (You can't deduct repairs or staging.)
For adjusted cost basis, this is where you have a problem. Because this house was a gift, her cost basis is the cost basis of the original giver, which is usually what that giver originally paid when they bought it. You may be able to find this in old property records. Then you can add to the cost basis, the cost of any permanent improvements you made over the years (new roof, furnace, etc.). An improvement adds value or extends the useful life of the property. Simple repairs, which restore the property to as-was condition, are not adjustments to the basis.
You would report this as the sale of a second home in Turbotax under Income from Sale of Stock and other Investments. The capital gains tax rate is 15% for most taxpayers.
Be diligent about trying to document the giver's original cost. If you are audited, the IRS can reduce your cost basis (and increase the amount of taxable gain) by any amounts that you can't prove.
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