Whether or not the estate has to report the transaction has nothing to do with the Estate Tax Credit (the $11,500,000 threshold). What's at question is did your mother, or her estate have a capital gain upon the sale of the house. If it was part of an estate, the estate needs to report it. The basis would be the value on the date of your mother's death, so unless there was some very quick appreciation, there would be no gain.
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