Yes. She should file as single since it has now been more than two years after the year of death and also requires her to have a dependent child.
In Common Law States (non-community property), the IRS treats a joint account as being owned 50/50 by each spouse. Therefore, your father's half was stepped up to the Fair Market Value (FMV) on his date of death, but her half keeps the original cost basis (what was actually paid for the stocks).
To input this in TurboTax, do the following:
- Enter the Form 1099-B exactly as it is writtent, by going to Federal; Wages & Income; Investment Income, Stocks, Cryptocurrency, Mutual Funds, Other
- On the screen that asks "Do any of these less common situations apply?", check the box for "I need to adjust my cost basis"
- TurboTax will then ask for the Corrected Basis. Enter the amount you calculated using the 50/50 rule above
- For the "Inherited" half, TurboTax often suggests typing "Inherited" as the date, which automatically grants Long-Term Capital Gains treatment, regardless of how long she actually held them
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