What is reported as final income for tax purposes on sale of an inherited home?

[GodChoseMe]

Long story short, 4 siblings and myself are on an out-of-state property that we inherited from our mother almost 17 year ago. One sibling filed bankruptcy 5 years ago and we could not afford to pay for his share. The trustee handling his bankruptcy took us to court and we finally decided to let the house be sold by the trustee (too much drama between us to do ourselves). 

For simplification, imagine these are the fees associated with the sale of the home:

Purchaser paid $800,000

Trustee's Real Estate Agent gets $24,000 - 3% Commission

Transfer Tax of $10,000

Trustee's Fees with court case - $50,000

So, we are left at $716,000 divided by 5. Now, the state the house is in has a stepped up valuation for the house because we inherited it at our mother's passing. So, we only pay taxes on the difference between what the house sold for and it's assessment value at the time of our mother's death. 

Here's my question: Do I pay taxes on sale price minus fees minus stepped up valuation divided by 5? In essence, for a situation like this where we have the stepped up valuation in play, what's the formula to get to what we actually pay taxes?

[Mike9241]

during the last 17 years was the property used for? this greatly affects the answer. 

[GodChoseMe]

Two siblings lived there as their primary residence until the home was recently sold.

[tagteam · Accepted solution]

---

@GodChoseMe wrote:

Two siblings lived there as their primary residence until the home was recently sold.

---

The two siblings can almost certainly use the Section 121 exclusion to exclude their share of any capital gain resulting from the sale.

See https://www.irs.gov/taxtopics/tc701

Your (one-fifth) share of the gain would be calculated as the gross sales price (less selling expenses) less your adjusted basis (the fair market value on the date of death).