@Anonymous_ I agree that, if the grandmother retained a life estate in the property, the issue with regard to cost basis would be whether it was sold before or after grandmother's passing. If sold after her passing, the remainderman would receive a stepped-up basis.
But I am not sure that the "three-year rule" permits a stepped-up basis when the gifted property is sold. I think it states only that, in the case of property gifted within three years of donor's death, its value must be included in the estate for estate tax purposes.
In any case, I agree with your previous recommendation that the OP seek professional guidance.
**Answers are correct to the best of my ability but do not constitute tax or legal advice.
