My brother inlaw who is a citizen of Israel wishes to transfer $400,000.00 from his bank account to my wife's bank account in US. My wifw is a citizen of US. How IRS look at this? Will this money be taxable? How my wife can avoid taxes?

There are no transfer taxes, and, since he is NOT a U.S. citizen, there will be no gift tax.

Your spouse will gave to report the transfer on Firm 3520, but that is information only.