NON-COMMUNITY PROPERTY STATE: To answer your question, on the Adjusted Basis of Home Sold worksheet add the Step Up on the increases to basis section, line 7. Half of $1,015 million is $507,500. Subtract half of the original cost($130,000) and replace it with the $507,500.

Don't forget half of the improvements before Spouse's death can be added to the $507,500(TP's half) plus TP's half of original cost PLUS 100% OF IMPROVEMENTS AFTER DEATH.