Since you did not receive any of the proceeds, you are not required to report the sale. However, since the IRS received the form 1099-S reporting the sale, it might be wise to report it to avoid a query from the IRS about it later on.
The best way to do this would be to report it as the Sale of Home in the Less Common Income section of TurboTax, using the Income and Expenses tab in the Federal section of TurboTax. You will enter the amount reported on your form 1099-S as both the sales proceeds and cost basis.
To be technically correct, you would need to report the sale by creating a rental property in TurboTax and then reporting the sale of it. However, this would not be appropriate since you didn't actually rent it out this year, so it would be difficult to answer the questions in that section accurately.
The goal is to get the form 1099-S amount reported on your tax return, and the home sale entry will accomplish that.
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