The stepped up basis for a spouse depends on which state they lived in. If they were in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Alaska is an opt-in community property state that gives both parties the option to make their property community property.) the entire basis of the property would have been stepped up at the death of your mother. However, in all of the other states, each spouse has separate basis (half of the purchase price) and the widowed spouse only receives a basis increase on the deceased spouse's half of the property.
For example, a house bought in 1961 for 8,000 dollars with the first spouse dying in 2008 when market value was 200,000 dollars would give the spouse in a community property state a 200,000 dollars basis. However, in all other states the widowed spouse would have an inherited basis of 104,000 dollars.
Generally, you will need to make the basis calculations outside of the program (unless the home was a rental or business property with depreciation) and enter the inherited basis as the cost basis. He must maintain records of the inherited cost basis calculations with the rest of his 2016 tax documentation. The basis of the home will be the inherited basis plus the cost of improvements (if they are in a community property state, include only the improvements after your mother passed away. If he lived in another state, include half the cost of improvements prior to your mother's death and 100% of the improvements after her death.)
