I would value the rifle at ROUGHLY $800, based on your description. but that is not an offer to purchase as I have enough Krags already! The initials are "JSA", but the date appears low, I'd expect 1899, for that number.  Depending on the person's name, and service record, the value could be greater. I'm tempted to ask why you would wish to sell an irreplaceable heirloom?  "Family" guns can NEVER be replaced if you should change your mind at a later date, and NO one would ever have a closer feeling for it than you. Does anyone else in the family want it? You should ask.

As to selling it "legally", I believe, since it is past the cutoff number of 152670* and thus considered a "firearm", YOU would be probably be more comfortable selling it to a licensed dealer or collector. But, I also believe it is classified as what is known as a "Curio and Relic", and, so long as you are not "in the business of selling guns", it could be sold to any adult who was legally entitled to purchase it, in your state, city, etc. Not being a "hot" crime/gang weapon the odds are infinitesmal that any problem would occur, unless the BATF agent's ticket quota was low, or they had a wild hair for some reason.

*The Krag is one of those arms which exposes the arrant stupidity of our bureaucrats - the rifles are either all "good" or all "bad"; just because one's number is such and so, does not change the fact that the items are ALL physically identical.