the seller is supposed to report the sale, especially if they got a 1099-s. however, because this is a sale between related parties (siblings) the loss is not allowed. They would enter cost in the proper column of form 8949, then use code L and report the loss as a positive number in column g.
if they got a 1099-S, they need to file. Otherwise, see this link to see if they need to file based on gross income. Gross income is not reduced for capital losses.https://www.irs.gov/newsroom/heres-who-needs-to-file-a-tax-return-in-2024
