In the episode in question, “Home Improvement” Season 4, Episode 19 (“The Naked Truth”), Tim’s brother Marty Taylor (William O’Leary) and sister-in-law Nancy (Jensen Daggett) visit the family while traveling for a job interview. Of course, both Tim and Jill are excited to see their relatives and quickly invite them to stay with them. While Tim and Jill are optimistic that their stay could become permanent should Marty be successful in his interview, such a proposition quickly becomes an uncomfortable one for Tim and Nancy.
The morning that Marty and Nancy arrive, Tim takes special notice of Nancy’s physique and even makes a handful of comments about her fitness goals. While Nancy reports that she is determined to “get her old body back,” Tim and Jill both note they think she’s already found it. While the conversation is innocent enough, it quickly takes on a different meaning. Only a few minutes later, Tim discovers that the shower in the master bedroom is running. Assuming the shower is currently occupied by Jill, he strips down and sneaks into the bathroom. Upon throwing open the shower curtain, however, Tim finds that Nancy is the one currently bathing.
After an overly casual “Hey” from Tim, Nancy deliriously screams “Tim!” Never too quick on the draw to begin with, Tim lets his interior monologue spill out as his sister-in-law attempts to cover her body with her hands. “You’re not Jill,” he says, awkwardly stating the obvious. Another pregnant pause later and Tim announces his departure before closing the shower curtain and slinking away.