Your basis is in two parts. You and your spouse purchased the house for $80,000. Your half (apart from depreciation and other considerations) is $40,000. At death you inherited half of the FMV, that is $100,000. Your basis (apart from depreciation etc) is $140,000.
Qualified Joint Interest
Include one-half of the value of a qualified joint interest in the decedent's gross estate. It doesn't matter how much each spouse contributed to the purchase price. Also, it doesn't matter which spouse dies first.
A qualified joint interest is any interest in property held by married individuals as either of the following.
Basis.
As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Decrease the cost by any deductions allowed to you for depreciation and depletion. Increase the reduced cost by your basis in the half you inherited.
Pub 551
@jed_and_brenda
