@happyDonate , while reading through your post and my colleague @Mike9241 reasonable answer , I come up with a slight different take on this :
(a) Start the year with H /S owning 2 shares of the house -- each valued at $100 == $200
( b) when H dies, under CA laws H's Estate and that of the W gets step to FMV ---- the third share does not fall into the decedent's marital estate and therfore remains at original basis.
(c) when the W passes, her marrital property ( two shares ) gets step up again to then FMV ---- the non-marital property i.e the son's share remains at original acquistion basis.
Does that make sense ---- the step up in case of passing on an owner gets a step up i.e. his/ger marital portion of the Estate. In Non-Community property states it is only the decedent's Estate that gets step-up because there is no recognition of Marital property.
Is there more I can do for you \?
