Yes. It does appear the inheritance of the house is not a federal or state taxable transaction. Arizona has no inheritance tax. And you would not have to file a federal Form 706 estate tax return.
I was confused by what you meant by your father passed and left the home to you and your sister but the house was already in your and your sister’s name. If the home was already in your names, was the house transferred before your father passed?
I'm sorry for your loss.
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