Can a gift of a home be considered an inheritance if the donor dies?

[dan10]

Last year my wife was given a house by her parents. It was the house that she and I had long been living in. About three months later, we sold the house and moved to another state. Two or three months after we sold, her dad died. We are going to have to pay capital gains tax. However, if the home had been an inheritance, I don't think we would have to pay the capital gains tax because there would be no gain (based on Fair Market Value at the time of the death). Can a gift of a home be considered an inheritance if the donor dies soon AFTER the home is given?

[MichaelL1 · Accepted solution]

A gift and an inheritance are different as you are finding out.  The house was sold before the father died so it will be considered a gift for tax purposes.

The basis in the home is the cost it was was to the person that gave you the house or FMV whichever is lower. 

Sorry.