Hi, late to the party (again) but agree with @joshuabarksatlcs assessment. 
When someone dies intestate, state laws take over…What did probate court say? likely that spouse inherits everything… with stepped up basis as appropriate. Retrospective appraisal (DOD) establishes basis for estate and should be done. Sec 121 does not apply as stated. Can’t comment on prop 13… I’m on the other coast. 

Serious questions about attorneys handling of the matter.