Basically, you got a step up in the cost basis on the date your sister passed. (Not the date you acquired actual ownership.) . All prior depreciation taken by your sister prior to her passing therefore evaporated and basically "went away" for you. If you continued to rent out your percentage of the property you inherited, then you were required to take depreciation based on the stepped up cost basis, from the date you inherited it. When you sell the property, you are required to recapture that depreciation *you* took, and pay taxes on it, in the year you sell the property.
