Incorrect execution status for last command run with the PowerShell Extension

Prerequisites

• I have written a descriptive issue title.
• I have searched all open and closed issues to ensure it has not already been reported.
• I have read the troubleshooting guide.
• I am sure this issue is with the extension itself and does not reproduce in a standalone PowerShell instance.
• I have verified that I am using the latest version of Visual Studio Code and the PowerShell extension.
• If this is a security issue, I have read the security issue reporting guidance.

Summary

The execution status for the last command is being incorrectly reported in the $? automatic variable when using the PowerShell Extension. While using PowerShell in Visual Studio code, the execution status is reported properly by $?.

As an aside, getting the ExecutionStatus via Get-History | Select Id,ExecutionStatus,CommandLine seems to always report 'Completed' even after encountering a "command not recognized" type of error.

Tagging @SeeminglyScience per his request via the PowerShell community Discord.

PowerShell Version

$PSVersionTable; $Host

Name                           Value
----                           -----                                                                
PSVersion                      7.5.0
PSEdition                      Core
GitCommitId                    7.5.0
OS                             Microsoft Windows 10.0.26100
Platform                       Win32NT
PSCompatibleVersions           {1.0, 2.0, 3.0, 4.0…}
PSRemotingProtocolVersion      2.3
SerializationVersion           1.1.0.1                                                              
WSManStackVersion              3.0

Name             : Visual Studio Code Host
Version          : 2025.0.0
InstanceId       : 8ba0c99d-557c-43db-b23b-699ec7517872
UI               : System.Management.Automation.Internal.Host.InternalHostUserInterface
CurrentCulture   : en-US
CurrentUICulture : en-US
PrivateData      : Microsoft.PowerShell.ConsoleHost+ConsoleColorProxy
DebuggerEnabled  : True
IsRunspacePushed : False
Runspace         : System.Management.Automation.Runspaces.LocalRunspace

Visual Studio Code Version

code --version
1.98.2
ddc367ed5c8936efe395cffeec279b04ffd7db78
x64

Extension Version

code --list-extensions --show-versions | Select-String powershell

ms-vscode.powershell@2025.0.0                                                                       
tylerleonhardt.vscode-inline-values-powershell@0.0.7

Steps to Reproduce

Open the VS Code terminal with the PowerShell extension. Run:

FakeCommand
$?

Then switch to PowerShell in the VS Code terminal or in Windows Terminal and run the same command.

In the PowerShell extension, it returns True.
In PowerShell, it returns False.

Visuals

Logs

No response

Start by reproducing the reported FakeCommand and $? sequence in the PowerShell extension's VS Code terminal, then compare it with PowerShell in Windows Terminal. Done means the extension reports $? as False after the unrecognized command, consistently with standalone PowerShell.