My Father passed away about 1 1/2 yrs ago and I was the sole inhertitor of the house. Since he passed away the economy has been in a downturn and it was sold for less than it would have been worth at the time. Of his passing. Plus I put additional money into the property to prepare it for sale. Since the value was now less than when I inherited, do I still have capital gains?

Your cost basis of the house is the fair market value at the date of death of your father. If you sell it for more than your cost basis, you have a gain.. long term capital gain. If you have a loss, it is not deductible. Your U.S. Tax Return: Tax on Inheritances

If you have a gain, you may be able to exclude the gain up to $250K if it is your main residence and you meet the requirements. Your U.S. Tax Return: Profit From the Sale of Your Home