The best thing to do right now is to speak with your own attorney, not just people online. There could be some complicated issues involved and the only way to properly tease all of them out is to speak with someone whom you've retained.
That being said, your parents should have filed a gift tax return, so since they didn't that's another good reason to consult with a competent local attorney.
Finally, as a general matter, since you and your sister received the house as a gift, you and she took a carryover basis (i.e., the cost basis in your hands is the same as it was in your parents' hands), and you and she will be liable for the capital gains tax on the sale of the house.
My answer does not constitute legal advice and may not be relied upon by anyone for any purpose and does not constitute an attorney/client relationship or an offer to form such a relationship. This disclaimer is intended to be fully compliant with the requirements of Treasury Department Circular 230 and the terms thereof are fully incorporated by reference. If you wish to consult with me please contact me at dana@nytaxcounsel or visit my website at www.nytaxcounsel.com
I'm sorry for your father's passing.
There may be a problem that your parents didn't file the gift tax return; also, you do owe capital gains on the gift.
If you would like to come in to discuss this and other relevant issues, I would welcome that - and we can setup a time to meet.
The capital gains tax that you owe is based on the difference between your parents' basis at the time of the gift (what they paid, minus depreciation, increased by improvements) plus any improvements you have made, minus any depreciation you have taken - subtracted from the net purchase price. If there was a failure to file a gift tax return, you should discuss that now with your own CPA. Chance are that even if the return was not filed, the house was worth less than your parents' then combined lifetime exclusion (possible $4,000,000), so there is no harm.