Get your taxes done using TurboTax

As the answer below says you do not report gifts on your tax return and gifts are not taxable.  From what you've said it is not taxable.  There must be more details.  Ask your tax preparer why it's taxable.  Did your mil take it out of a IRA or some kind of retirement account?  Did she sell something?  Was this a regular Desktop CD/Download program like at a bank or Credit Union?