@Scorp_930 wrote:
....the fact that she remained in the house makes the property remain part of her estate in the eyes of the IRS, making it an inheritance......
The result is not in dispute on these facts. If you mother actually transferred full ownership to the property (in fee simple, without reserving a life estate for herself), then it was not in her estate when she passed and could not, therefore, have been considered to be acquired from a decedent.
As a result, the property was not inherited (i..e, not acquired from a decedent) and, thus, no stepped up basis.
