Unfortunately, if you received the payments due to being listed as beneficiary, then your father-in-law must have passed away. You must include the income on your return.
The interest received is considered installment interest income on Schedule B and the principal payments are considered installment sale income (Form from principal going first to Form 6252 and then to either 4797 and then to Schedule D or straight to Schedule D, depending on the use of the property sold).
Refer to the father-in-law's prior year income tax return to find his gross profit percentage received to be reported on his Form 6252 and then carried to the other forms on his return and guiding you how to report on your return.
You are considered as having inherited the installment sale contract from your father-in-law and are able to use his remaining cost basis of the installment sale against the remainder of the payments to reduce your tax on them. You will claim it on your return because you received the money (and the contract was inherited by you) and it was not taxed on your father-in-law's return yet until it is received, which is after his death.
Publication 537 has not yet been updated by IRS, so you will have to use the information provided currently in the 2019 Pub 537.
The transfer of an installment obligation as a result of the death of the seller isn’t a disposition. You did not sell the property, just received the installment payments. Any unreported gain from the installment obligation isn’t treated as gross income to the decedent. No income is reported on the decedent's return due to the transfer. Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments.
Refer to the following from IRS Pub 537 regarding transfer of installment income
