Even though you had right of survivorship, the house was STILL part of your father's estate.
when he died, the basis for the house was stepped up to the Fair Market Value (FMV) at the time of your father's death.
Hence, when the estate sold it, it would only pay capital gains taxes on the difference between the sales price and the combination of the stepped-up FMV and the costs of the sale. It's likely that the estate will owe ZERO taxes. The estate STILL have to report the sale, however, on a ficuciary tax return (Form 1041).
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