The example stated is why you want life estate treatment for this @cstein64 (either expressed in the deed or implied).
Parallel Example (with LE):
- Mom and Dad bought the house in 2000 for $200,000.
- Sometime subsequent, they add 2 kids to title (with life estate retained or implied).
- Mom and Dad pass in 2022, house has a fair market value of $400,000 on the date of last to die.
- Kids now have $200,000 basis each in the house (FMV on the date of last parent to die).
