There is no step up in basis after the first life tenant passes.
The basis of the property is stepped up to its full fair market value upon the passing of the last life tenant.
@Pfan wrote:
Are you aware of a situation where the cost basis would be calculated in two increments?
That would be applicable in the scenario, for example, where your parents owned the house as joint tenants with rights of survivorship in a non-community property (common law) state. In that case, the surviving parent would take the deceased parent's one-half at its fair market value on the date of death. The property would then typically receive a second stepped up basis (to fair market value) at the time the surviving parent passed.
