It does not qualify for the exemption on the exclusion on the sale of primary residence. To be eligible for the exclusion, you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale. Based on what you stated above, it was not your primary residence, so it does not qualify. You could possible do a 1031 exchange, since upon the death of your sister the property went from personal use to an investment.
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