to get the home sales exclusion you would have had to lived in and owned the house for 2 out of 5 years before sale. you only owned it 6 months. you say you sold it for 20K more than it was worth. what about selling costs such as title charges, other transfer taxes. these would reduce your gain. since you inherited the property, the sale would result in long term gain. you will have to tell TT that you acquired it by inheritance . for long term capital gains , depending on your other income, there is a 0% tax bracket so you might end up paying no federal tax on the gain. state taxes, if any, will be different.
the title fees you paid would be part of your basis. as well as any improvement costs made after she died,
