You would start by reporting your basis. Your basis is the Fair Market Value of the home when you inherited it plus improvements. The basis is subtracted from your share of the sale to arrive at any gain. Your basis is 53,500 FMV plus improvements 18,285 for a total of 71,785. Your portion of the sale is 74,500, so you had a gain of 2,715.
The 1099-S should report the breakdown of your share only. You would report the 1099-S and the basis of 71,785 for a gain of 2,715. If the 1099-S is not reported correctly, you can ask for a corrected copy.
IF the property was used as a rental at any time after you inherited it, the depreciation taken, or could have been taken, would need to be recaptured.
According to the IRS:
“Multiple
Transferors
For multiple
transferors of the same real estate, you must file a separate Form 1099-S for
each transferor. At or before closing, you must request from the transferors an
allocation of the gross proceeds among the transferors. The request and the
response are not required to be in writing. You must make a reasonable effort
to contact all transferors of whom you have knowledge. However, you may rely on
the unchallenged response of any transferor, and you need not make additional
contacts with other transferors after at least one complete allocation is
received (100% of gross proceeds, whether or not received in a single
response). If you receive the allocation, report gross proceeds on each Form
1099-S accordingly.
You are not required
to, but you may, report gross proceeds in accordance with an allocation received
after the closing date but before the due date of Form 1099-S (without
extensions). However, you cannot report gross proceeds in accordance with an
allocation received on or after the due date of Form 1099-S (without
extensions).
If no gross proceeds
are allocated to a transferor because no allocation or an incomplete allocation
is received, you must report the total unallocated gross proceeds on the Form
1099-S made for that transferor. If you do not receive any allocation or you
receive conflicting allocations, report on each transferor's Form 1099-S the
total unallocated gross proceeds.”
https://www.irs.gov/forms-pubs/form-1099-s-proceeds-from-real-estate-transactions
