In a community property state, the entire property (not just one-half) receives a stepped up basis to the fair market value as of the date of death of the decedent.
However, there is also the concept of a step-down basis (i.e., if the fair market value is less than the adjusted basis, then the basis is still the FMV on the date of death).
Regardless, if the sale results in a loss, that loss is not deductible if the property was held for personal use.
