You should get a copy of the last year return that she filed and see how it was reported on that return. If she did sell the property at a loss and is only reporting the interest income each year, you would do the same on your portion. If she sold the property at a gain then you will find a Form 6252 in the return and you will need to use the same gross profit % on the Form 6252 in your return for any principal payments received in addition to reporting the interest income received as interest income.
If you know the original selling price and her original cost basis you can calculate the gross profit %, or you can copy it from her prior year return form 6252 so it is taxed the same way in you and your 5 siblings hands as it was in your grandmother's in the prior years.
Per Pub 537
IRS Publication 537
Transfer due to death.
The transfer of an installment obligation (other than to a buyer) as a result of the death of the seller isn’t a disposition. Any unreported gain from the installment obligation isn’t treated as gross income to the decedent. No income is reported on the decedent's return due to the transfer. Whoever receives the installment obligation as a result of the seller's death is taxed on the installment payments the same as the seller would have been had the seller lived to receive the payments.
