Hi @cguerrant - thanks for your question and sorry to hear about your loss.
It sounds like you could have a taxable capital gain on the house. Unless you lived in the house for two years prior to selling it, you don't qualify for the Section 121 (principal residence) exclusion. It sounds like your daughter and granddaughters may have lived in the house, but it was not your principal residence.
Your basis in this house would be 1/3 of the Fair Market Value in September 2019 (your share, when you inherited it) plus the amounts you paid your two sisters to purchase their shares, plus any capital improvements done to the house that you paid for.
To calculate capital gains, take your sales price, subtract your basis and any selling costs (such as broker fees and title charges).
The use of proceeds does not impact the capital gain tax treatment.
I hope this information is helpful!
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