who owned the property on the date it was sold? that who should have gotten the 1099-S and needs to report the sale. if it was your MIL, then she made a gift to you of the proceeds which makes it nontaxable/nonreportable by you but it should have been her that got the 1099-S. on the other hand, if your wife was the owner then you report the sale using the basis based on FMV on the date of death of your FIL. or it could have been the FIL estate which requires filing form 1041 and the gain/loss would likely pass out to your wife.
