During an appearance on "Watch What Happens Live", where she answered questions about her personal life and impressive music career.
Host Andy Cohen asked Dolly about the best thing she has ever bought with the royalties she earned from Whitney's version of "I Will Always Love You" - the song Dolly, 75, originally wrote and recorded in 1973.
She said, "Well, that's a good question. I bought my big office complex down in Nashville. And so I thought, well, this is a wonderful place to be. I bought a property down in what was the black area of town."
"And it was mostly just black families and people that lived around there. And it was off the beaten path from 16th Avenue and I thought, well, I am going to buy this place. It was a whole strip mall."
"I thought this is the perfect place for me to be considering it was Whitney. So I felt this was great. I'm just going to be down here with her people, who are my people as well. I just love the fact that I spent that money on a complex, and I think, 'This is the house that Whitney built.' "
According to Forbes, Parton made about $10 million (£7.1 million) in royalties from the Grammy-winning song throughout the '90s, and the cash is still rolling in.
Whitney was found dead aged 48 in a hotel in Beverly Hills, California, 2012. The coroner's report showed she had accidentally drowned in the bathtub, with heart disease and cocaine use as contributing factors.