No, the basis is not the value of the traditional IRA on December 31, 2021. The basis is only the nondeductible contributions she made that were in the traditional IRA. If she had nondeductible contributions before 2021 (had a basis) then you will enter it on your 2021 return during the IRA contribution interview (steps 8 and 9 in the instructions above). But she should have Form 8606 from prior years when she made the nondeductible contributions.
If she failed to file Form 8606 in prior years, she will need to file them. She might be able to file Form 8606 without amending the return. Please see Prior years Form 8606 and Instructions for details.
There can be a penalty of $50 for not filing Form 8606 on a timely basis, but the penalty can be waived if you can show reasonable cause for not filing. Please see this information for suggestions regarding reasonable cause.
Line 4 of your spouse's 2021 Form 8606 is correctly blank since she didn't take a traditional IRA distribution or make a Roth conversion in 2021. Line 4 of the 2021 Form 8606 will only have an entry if there was a distribution or conversion in 2021.
[Edited 3/15/2023 | 4:49 am PST]
@naviator2003
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