No, you do not have to report the full sale. You can choose to report it with little to no change on your tax return if the following applies to you.
Inherited property receives a 'stepped up' cost basis. This means that your cost is the fair market value (FMV) on the date of death. If the property was sold shortly after death, then the selling price and cost basis will be close to equal. And you can use selling expenses as well. In this situation there would be little to no tax change on your return.
You can choose to nominee the sister's portions if the aforementioned does not apply to your situation. See the instructions below.
Nominee returns.
Generally, if you receive a Form 1099 for amounts that actually belong to another person or entity, you are considered a nominee recipient. You must file a Form 1099 with the IRS (the same type of Form 1099 you received). You must also furnish a Form 1099 to each of the other owners.
File the new Form 1099 with Form 1096 (this is a transmittal for the 1099) by mailing to the Internal Revenue Service Center for your area. (Provided on the Form 1096)
- On each new Form 1099, list yourself as the payer and the other owner, as the recipient. On Form 1096, list yourself as the nominee filer, not the original payer. The nominee is responsible for filing the subsequent Forms 1099 to show the amount allocable to each owner.
Note: If you did live in the home as your main home or were a part owner before death (seems as though you did simply inherit the house), then it could have a different tax outcome.
@tsanchez2
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