It doesn't matter if the kids inherited it.  Mom got a step up in basis when dad died and the kids got a percentage of her basis when she gifted them each with a portion of the house.  The kids got ownership to the house years ago because someone took some bad advice.  They got a portion of cash when the house was sold so it's time to pay some tax.  The only question is, how good of a stab in the dark can we make when we estimate the basis from that long ago.  But the bigger issue relates to Mr Frustrated's post.  How in the world is Jim going to get back on track for the week with this big bump in the road?