If you have many items, going back to the original position will be tricky unless you store the original position relative to all other items (since you might remove other items from #list1).
To keep things simple you could instead provide an undo button that restored the most recently-moved item to its original position, by remembering either the previous or next elements in the list.
Store:
- $(item).prev() and $(item).next() of the most recently-moved item, and
- the removed item as removedItem.
Then depending on whether there's a prev() or after() defined for the original item, use something like:
$($(item).prev()).after(removedItem);
to restore the most recently-moved item to its original position.