@shelley1991
Note further, you might have a gift situation if you accept less than fair market value. If the home is worth $1M, but you agree to accept $400K in cash for your half, then you are giving your sister a $100K gift of equity. That requires the filing of a form 709 gift tax return, and it does not adjust your sibling's cost basis**. That is, if you accepted $400K and you gave a gift of equity, then your sibling's adjusted basis is 200+400=$600K, and they would have a $400K taxable gain if they sold at that price.
**If you are required to pay gift tax, then your sibling's cost basis does get an adjustment for the gift. But this is uncommon. Most people never actually pay gift tax even though large gifts are considered taxable, because you have a lifetime deduction of $12,060,000. You don't actually pay gift tax unless your lifetime gifts are more than your lifetime deduction.
