First you need to determine what income there is to report. Then determine who has to report it.
The building/property has a cost basis. The reportable capital gain is the difference between what the property sold for and that cost basis. Mortgage payout and current market value are irrelevant. If you mother-in-law [MIL] inherited the property in 2015, her cost basis was the fair market value in 2015 (not what your father-in-law inherited it for way back when or what his mother paid for it). So, it's possible the current sale is actually showing a capital loss, rather than a gain.
Somebody has to report the gain or loss. Your MIL should report it all and treat the $110,000 as a gift to you (requiring her to file a separate gift tax return*). Or you could each report your share based on the 1099-S, but it's a little "iffy" is you actually had a beneficial interest in the property.
So, you need to report an erroneous 1099-S. Enter the sale at
-Investment Income
-Stocks, mutual funds, Bonds, Other (Real estate is other)
Answer no, when asked if you got a 1099-B. then follow the interview. You will reach a screen titled "Select any less common adjustments that apply". Then check "Some or all of the proceeds of this sale do not apply to me'. It will go on form 8949 with 0 net gain or loss and a code for nominee adjustment.
*"Gift Tax" is somewhat of a misnomer. Even though a gift tax return may be required, very few people ever actually pay federal gift tax. The purpose of the gift tax return is usually only to document a reduction in the allowable estate tax exemption.
See https://turbotax.intuit.com/tax-tools/tax-tips/Tax-Planning-and-Checklists/The-Gift-Tax-Made-Simple/...
