@Opus 17 wrote:
Also remember that although you can make reasonable estimates of improvements when you file, if you are audited, the IRS does not have to award any basis adjustments that can't be proven with reliable records.
I agree with the statement above; your mother will need documentation of some sort for the costs of improvements made during your mother's period of ownership in the event the IRS questions the basis your mother reported.
Further, the IRS does not have to accept the FMV as reported by the likes of a Redfin or Zillow; they only have to accept an appraisal by a certified real estate appraiser and, frankly, the appraiser, knowing it is a DOD appraisal, may arrive at a higher figure (which is better for your mother in any event).
Finally, I believe the basis figure would be $66k for your father and $66k for your mother initially, for a total of $132k (unless my math is out of whack).
