ScottGem is correct.
1. If the property is gifted, your husband's dad must file gift tax return of the fair market value. He may not be paying any gift tax as there is life time exclusion of 1 million.
2. In case of gift, your husband's basis is the based on his dad's basis and the fair market value at the date of death.
3. In case on inheritance, your husband's basis is the fair market value at the date of death. Your husband does not pay any inheritance tax.
4. If his estate is more than estate exclusion amount (2 million limit in 2008), then there is no tax. If estate exceeds the exclusion limit, estate tax must be paid.
Read
Your U.S. Tax Return: Tax on Inheritances