Does this even belong on Schedule E?  I don't see any business or profit motive.  If the FMV appraisal at date of death was $500K but that did not take into account a $12K de facto lien from the tenant, I think you start with basis of $488K and call the attorney fees a selling expense, reporting it all on Schedule D.  Rental income goes on Schedule 1, Line 8.  

You did send a 1099 to the tenant, right?