I can answer this for you, but to be accurate, I need to know some additional information.
1. When you inheritied it in 2003, what was the status of the property between then and October 2007?
2. From 2007 to date, when it was on lease to own:
a. was there interest collected and reported on anyone's tax return?
b. How were the lease payments reported to the IRS? (schedule E? and by whom)
3. Who was on the deed? were all of you on the deed?
Under the rules, since this property was inherited and never used as a primary residence or for personal purposes as a second home, then it is considered held for investment.
Since it was converted to rental use, then it is income producing.
This means you have the following tax considerations:
1. Capital gains on the sale of the rental unit. the cost basis is the Fair Market Value or appraisal value as of the date of death of the person from whom you inherited the property. That figure should appear in the estate tax return.
2. Since it was a rental unit, the IRS will consider the property has been depreciated, whether it was or not. So at sale you need to take the depreciation. The IRS then recaptures the deprecaition and you pay capital gains tax on that of 25%.
You can get an idea of what the tax liability would be using a calculator from the following website: