Does the main building qualify for the $250,000/$500,000 Principal Residence exclusion?

If so, the MIL building can NOT be included as part of the Basis because the separate structure does NOT qualify for the exclusion.

So if the main home is not taxable but the structure is taxable, you NEED to enter the sale at the Fair Market Value.  In most cases, the value would have increased since it was built (plus the depreciation lowers the Basis), so the sale of that separate structure will be taxable.

Some county property tax assessments value separate structures separately.   Many county property tax records may show something like the increase of value due to improvements during the year.  So if you get a copy of the valuation of before and after the structure was built, that would be a good estimate of the FMV at the time it was built, then estimate the average increase of real estate since it was built.