Inheritance

If the sale proceeds of the inherited home were greater than its Fair Market Value (FMV) on the date of the last parent's death, then she would have a capital gain to report on her tax return.

Presumably the parent's estate sold the home.  If the estate had taxable income of $600 or more, including any gain on the sale of the home, the estate must file Form 1041 and should be providing your wife with a Schedule K-1 (Form 1041) passing your wife's portion of the taxable income through to your wife for taxation on your wife's (or your joint) tax return.