As xmasbaby0 says, more details are needed.
The capital gain on the sale of a person's primary home is not taxable (up to $250K, $500K married). To be eligible you must have lived in and owned the home for at least 2 out of the 5 year prior to sale. You do not even need to report it on your tax return, unless you got a tax document, usually a 1099-S. The 1099-S may have been included in your closing documents, instead of arriving in the mail, in Jan. or Feb. of the following year.
If your MIL is the sole owner, then she is the only one with income. What you got was a gift. A gift is not reportable as income. If you were part owner, your MIL share is excludable as her primary residence, but your share is taxable as a long term capital gain. The $42,000 proceeds are not taxable. Only the gain (profit) is taxable. So, you need to know your cost basis, if any.
