I live in Maryland if that makes a difference.
In June 2007 my sister passed and she left her house, value low 200k, to my mother and myself, who also lived with her, thru Joint Tenants life tenants in the deed.
My mother passed in November 2009, passing the house to me thru deed.

I am thinking of selling the house this year, 2010, but don't want to get in tax trouble with 2010 tax laws.

As I understand 1/2 half of cost will be the assessed value at the time of my sisters death and 1/2 the assessed value at the time of my mothers death. Is this correct?
Also will the 2010 tax laws change how the cost will be figured?

I will then subtract the cost and sale expenses from the sale proceeds to determine my tax obligation.
Is my thinking correct or will the 2010 tax laws make things different?

Thank You In advance
Howard

" As I understand 1/2 half of cost will be the assessed value at the time of my sisters death and 1/2 the assessed value at the time of my mothers death. Is this correct? "-------> Correct.Both your sister and your mother passed away before 2010, FMV of the portion of the house, the stepped up basis, is the present basis of the property; the FMV of the 1/2 of the property that you inherited from your sister when she passed away is the present basis of the portion.For example, say your sister originally purchased the house at $100,000 and she left 1/2 of it to you upon her death, at which time the FMV of the portion was $100,000( I mean FMV of the house was $200,000 but 1/2 of it, $100,000 belongs to you). For tax purposes, the portion of the house would receive a step-up in basis, meaning your cost basis for the portion would become the FMV of $100,000. So, any capital gains tax you pay in the future will be based on the $100,000, not on the original purchase price of $100,000 that your sister paid to buy the house before.

"Also will the 2010 tax laws change how the cost will be figured?"----> In 2010, the stepped up baisis is eliminated in 2010.So, the cost basis of the property is its orignal cost. This means that if you inherit the property from your mother in 2010, then your basis is your mother's cost basis($100,000 for her 1/2 portion of the property when she inherited from her daughter n 2007), NOT current FMV of teh portion of the house. What I have learned is that the stepped-up basis rules for inherited property will be replaced with a modified carryover basis system in 2010. Under the new law, there will be a modified carryover basis system, where inherited assets will keep the deceased’s basis.

" I will then subtract the cost and sale expenses from the sale proceeds to determine my tax obligation.
Is my thinking correct or will the 2010 tax laws make things different?"---> Correct. Assume that you sell the house for $300,000. Then as you inherited the house from your sister and your mother before 2010, as we said above, stepped up basis applies to the house; the current basis of the house is $250,000( FMV of the portion when you inherited from your sister , $100,000 and FMV of the other portion of the house that you inherited from your mother in 2009( assume FMV of the portion of the house at your mother's death was $150,000), then $100,000+ $150,000=$250,000. Selling costs are $10,000 then your LTCG is $300,000-$250,000-$10,000=$40,000; If your marginal tax bracket ( personal tax rate, I do not know if you are Single or MFJ or etc) is 15% or 10%, then your LTCG Tax is $0, but you should pay LTCG tax to Maryland. The tax liability is 5%( assume your state CG Tax rate)*$40,000 is $2,000.
If you sell the house in 2010, then the situation will change; you,as a taxpayer whose tax bracket is 15%, MUST pay $40,000*20%=$8,000 to the IRS, not $0 as in 2009; No more 0% rule in 2010.