Pointing to a lady, a man said, "The son of her only brother is the brother of my wife."
How is the lady related to the man ?

Answer: D. Sister of father-in-law

Brother of my wife -- My brother-in-law;
Son of lady's brother is the brother-in-law of the man.
So lady's brother is man's father-in-law i.e. the lady is the sister of man's father-in-law.