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Hi and welcome to Just Answer!Because your parents are living in California - which is a community property state - the property has the stepped up basis equals to its fair market value at the time your father passed away.So the basis is really much more than the original purchase price.Assuming the fair market value was $600,000 when your father died 4 years ago - that is a new stepped up basis. In this case - if the property will be sold for $800,000 - the gain will be $800,000 (selling price) - $600,000 (basis) = $200,000 - and your mother may exclude up to $250,000 if the property was used as her primary residence...
See for reference IRS publication 551 - http://www.irs.gov/publications/p551/ar02.html#en_US_2010_publink1000257012
In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. For this rule to apply, at least half the value of the community property interest must be includable in the decedent's gross estate, whether or not the estate must file a return.
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great, this is what I hoped, so no reason to worry about retitling into the b trust