It is taxable if this was not your personal residence for 2 out of the last 5 years before the "sale" to get the profit excluded.
Technically you "sold" the home to the government so you will report the sale of the inherited home using the fair market value on the date of death for the basis... chances are good you will have a deductible loss after all the costs of the lawyers so it is in your best favor to report the sale... don't be worried.
