Investors & landlords

"how does my father's death (before the cottage was sold) factor in?"

If they owned the property as joint tenants, at your father's death his 50% share would receive a "stepped-up" cost basis to half the cottage's fair market value at that time.  The cost basis of your mother's 50% would remain unchanged - at 50% of the home original cost basis. 

So your mother's cost basis today would be her 50% of the cottage's original cost basis PLUS the stepped-up basis of your father's 50% share at the time of his death.

Example:

Let's say the cottage's original cost was $100,000 - giving them each a cost basis of $50,000.  Let's say its fair market value when your father died was $200,000.  Thus, at his death, the basis of his 50% share would step up to $100,000.

Your mother's new cost basis would then become her original basis of $50,000 PLUS the $100,000 value of her husband's stepped-up basis at the time of his death, for a total of $150,000.

SO - in order to calculate her cost basis at the time of sale, you'd have to know two numbers: the original (adjusted)cost basis of the home, and it's fair market value at the time of your father's death.