Legal Question in Real Estate Law in New York

It's not entirely clear what your frend left you. IF she left you a life estate in the house, you can sell your life estate but not the remainder. If she left you the house "after" her life, i.e., reserving a life estate for herself, you can sell the remainder but you likely will not get much for it. The cash gift, if it really is a gift, is no problem for you because gift tax, like estate tax, is payable by the giver (or the estate). The same is true for the value of the life estate, if it is a gift. On the other hand, if the property and cash were in exchange for services rendered, then you need to report these as income.