My wife has inherited property that came down the generations with no prior history of sale. The said property was condemned/acquired by the government to build public infrastructure. We received a settlement check after taxes were deducted in the foreign country.

1) Does this income need to be reported?
2) If I have to pay taxes on this settlement, how do we determine the basis price?
3) If we purchase replacement properties, does that offset/defer any tax liability? Can the replacement properties be purchased in US, in the foreign country and a combination of both?

Thank you