"They will inherit all the stocks in it. It is understood that he loses deductions if it were sold before then."

Uh, nope.

If it helps, remember that a C Corp is its own entity and is separate from the People that are shareholders in that corporation. No one gets the "deduction" or exemption for that house, because it is never sold before or after "then." It is owned by the corporation and when it gets sold, that also is by the corporation. Humans live and die all the time, and the corporation still owns that house separately.

Dispersing shares of a corporation upon death of a shareholder doesn't change anything about the corporation or its assets or operations. When you die, your Ford or GM stock passes on to your heirs. Ford and GM are not impacted by your death; they just change the name of who owns those shares.

The point here is you cannot take personal advantage of corporate assets without being taxed on the value of that benefit. If there are other shareholders, that most likely also set up an inequitable situation. You cannot shift personal life activities into the corporation for convenience, estate planning, thinking that makes them business expense, etc, which are often the reasonings for doing this. And it's wrong.

Your question is for a scenario that makes no sense. They need a Trust, not a Corporation, for that personal residence. Time to talk to a lawyer.