I'm sorry for your loss.
Should I simply change the original Cost Basis (i.e. $200 k) to the new step up'd cost basis of $300 k (i.e. 50% step up)?
No. Absolutely not. If you change the cost of "ANYTHING" in the existing asset, you will completely mess up the depreciation history, as well as the current year depreciation. Under no circumstances and with no exceptions do you every change the original cost basis entry of any asset. No exceptions.
What should I do in Turbotax to step up the cost basis to get more depreciation?
You simply enter a 2nd asset with a cost basis that is the amount of the step-up. Remember, the cost basis of the land steps up too. So if the original cost basis on the property was $200K with 50K allocated to the land, lets say the new cost basis is $300K.
Since the original cost basis allocated 1/4 of the total to the land, you must do the same with the step-up. You'll enter a new asset with a cost of $100K in the COST box, and $25K in the COST OF LAND box. The program (not you) will do the math and allocated 3/4 ($75K) to the structure. You can call the new entry whatever you want, so you know what it is. But it's classified as Residential Rental Real Estate in MACRS with an in service date equal to the date of passing, and depreciation on that stepepd up basis will be over the next 27.5 years starting on the date of her passing. So the first year depreciation on that will be pro-rated based on the date of passive/in service date.
