I think the IRS would disagree with the appraiser. in a community property state, joint ownership by only a husband and wife can be handled directly on their 1040. however, you say "owned my family members" which suggests there are and were owners other than the husband/wife. if so, then I believe a partnership return should have been filed for all the years the property was rented. if a partnership return needed to be filed a 754 election (to step-up basis) needed to be made in the year the transfer took place (2019).
if a partnership return is required then
from the IRS regs which govern the election
Time and method of making election.
(1) An election under section 754 and this section to adjust the basis of partnership property under sections 734(b) and 743(b), with respect to a distribution of property to a partner or a transfer of an interest in a partnership, shall be made in a written statement filed with the partnership return for the taxable year during which the distribution or transfer occurs. For the election to be valid, the return must be filed not later than the time prescribed by paragraph (e) of § 1.6031-1 (including extensions thereof) for filing the return for such taxable year (or before August 23, 1956, whichever is later). Notwithstanding the preceding two sentences, if a valid election has been made under section 754 and this section for a preceding taxable year and not revoked pursuant to paragraph (c) of this section, a new election is not required to be made. The statement required by this subparagraph shall (i) set forth the name and address of the partnership making the election, (ii) be signed by any one of the partners, and (iii) contain a declaration that the partnership elects under section 754 to apply the provisions of section 734(b) and section 743(b). For rules regarding extensions of time for filing elections, see § 1.9100-1.
if a partnership return is required but not filed and since it's obvious no 754 election was included, consult a tax pro. penalties for failure to file a partnership return are about $200/per month/partner for up to 12 months. each year stands on its own for penalty purposes. it may be possible for the her to report the depreciation of the step-up directly on her return if no valid 754 election was made but she would have to file an amended return.
also I just want to make clear is only the heir that gets the step up not the other owners.
let's say depreciated basis is $5 heir inherits her spouses 20% interest so to start heir's basis is $1. also assume FMV of the 100% of the property is $10 so heir's share is $2
