You would report the form 1099-C as other income on the form 1041. You have $1600 of income it would appear. There is a $600 exemption and you can deduct expenses for any property being dealt with in the estate. For example, the cost of ownership for the home before transferred to you. These items include but are not limited to, condominium fees, insurance premiums, maintenance and lawn services and insurance costs. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code.
Other deductions for the estate would be court costs and fees, cost of certified copies of the death certificate for example.
Costs incurred when selling property (advertising, supplies, dry cleaning/laundry of any clothes sold, etc).
Generally, any cost the estate (executor) paid that would not have been incurred were the property not in probate.
If there is any leftover income then it will be listed on the form K-1 distributed to any heirs to the estate.
I surmise there will not be any income to be distributed and thus nothing taxable.
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