In what state did he reside?
In what year did he die?
Is your wife the executor?
Has the executor submitted interim or final accountings, formal or informal to the beneficiaries?
NY state taxes estates of residents and non residents that have taxable values greater then 1 million dollars.
http://www.tax.ny.gov/pdf/2010/et/et706i_810.pdf
http://www.tax.ny.gov/pdf/current_forms/et/et706.pdf
It is the responsibility of the executor to file all necessary returns and pay all taxes. You should inquire of that person if any tax return was necessary to NY state and if it has been filed?
It seems likely from the attached instructoins that New York follows federal rules regarding basis, so she probably has a fair market value "basis" for income tax purposes.
She may also need a document from the state which would show the state has no interest in the property (from an estate tax point of view). NY apparently has a "Release of Lien" form.
http://www.tax.ny.gov/pdf/2005/et/et117_205.pdf
She probably would have to obtain one before selling the property, but typically, the executor or attorney takes care of this.
In my state, NJ, the state has a similar procedure. They issue "waivers" that have to be recorded with the county clerk and attached to the deed.
Back to income taxes.
She naturally would have to file a NY non resident individual return and report the sale to them in the year sold.
Good luck.