@MarilynG1 my concern is that it "sounds" to me like they had no idea the sister was renting it out. Because of that I'm of the impression that they are trying to "stick" them with recapture of depreciation they never took, as the sister is attempting to reduce the depreciation amount she has to pay taxes on.
While your method will work just fine, I would do it only after seeking legal advice and having the necessary documentation to back up the method used to report the income.
If they were sent "their share" of rental income over the previous three years in addition to their share of the sale price, I would treat the rental income as a gift and not included it on my tax return, since gifts are not reportable on any tax return anyway. But again, this would be only after seeking legal counsel for what I know will be coming 24-36 months down the road after I file.
Remember the three golden rules when dealing with the IRS.
1- You are guilty until proven innocent.
2- The burden of proof is on the accused (that's you the tax filer) and not the accuser.
3- If it's not in writing, then it did not occur.
