Agree with the $16,250 right now.

This might seem to be a confounding consideration but is meaningless to your task: "1989, mom and dad got divorced, as part of settlement, mom got house" because a settlement is going to take various valuable things into consideration. That isn't a property tax or income tax issue, though. It's like two kids dividing up the toys. Mom gets it at Dad's basis, unless there is a buy out at FMV as part of the divorce (such as a refi to FMV). That's one consideration I don't see already covered in all the comments, now that we know Mom was the sole owner at this point.

This seems like it should be applicable to something or someone, but it is meaningless: "FMV in 2015 say was 265,000, increase of 200,000 over basis in house" because the type of changing of ownership as well as the timing, makes a difference. In this case, nothing for the children triggers a step up in basis, and unless the divorce triggered a step up in basis (due to a buy out), everyone works off of the $65,000 improved basis from Dad's original ownership.