If you sold the house for $260,000, then you would subtract your selling expenses and the result would be your amount realized.
From your amount realized, you would subtract your basis to arrive at your gain on the transaction. Your basis would be the fair market value on the date of death (August of 2021) plus the cost of any improvements made.
I am not sure what part of the foregoing you are having difficulty comprehending and/or what you feel is unfair about that formula (it is essentially the same for everyone subject to this fact pattern).
