I would do it the other way around.
You inherited the home with a stepped up cost basis equal to the fair market value of the home. Assuming the real estate market didn't change much between the date of the owner's death and the sale, then the fair market value/your cost basis was also $27,500.
So you would report a cost basis of $27,500, a selling price of $27,500, so no gain and no loss.
Don't report this under "sale of your home", report this under sale of other property. You will be asked for the date you acquired the property, how you acquired it, and the cost basis or value. Once you enter the correct information, there should be no tax assessed on the proceeds.
