You all would receive a 1099-S if all names were on the title. The 1099-S is not entered anywhere, just info from it.
You're correct that each of your Cost Basis would be 120K/3 or 40K.
You all sold the home and each received a share of the proceeds. You would report 40K cost basis, proceeds of 48K, with 8K capital gain, as you mentioned.
Sherry would report a Cost Basis of 40K + 96K paid to other siblings (136K), proceeds of whatever she receives, minus cost of renovation and closing costs.
Here's more info on Sale of Inherited Home and How Capital Gains are Taxed.
@PeterinVT
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