How do I determine cost basis of property I sold when the original purchase price is unknown?

Thanks for the suggestions! I hadn't thought about checking with the county recorder's office. Do you know how far back their records typically go? Some of these properties might have been purchased 20+ years ago. Would contacting the IRS be worth it if the properties were purchased more than 7 years ago? And what if my dad didn't keep a depreciation schedule?

County records typically go back several decades - many counties have digitized their records, making searches easier. Even for properties purchased 20+ years ago, they should have the transfer information. Getting tax returns from the IRS beyond 7 years can be difficult, but if your father used a tax professional over the years, they might have retained records longer than the IRS. Even without formal depreciation schedules, any tax return showing rental income from these properties would be helpful since they would likely contain some property information. If you absolutely cannot determine the original purchase price, the IRS may allow you to use a reasonable reconstruction method, but you'll need to document your good-faith effort to find the actual records.

How exactly does this work? I'm in a similar situation with my uncle's estate and trying to figure out properties he bought in the 80s. Do they just look at public records or do they have some special database?

Sounds interesting but I'm always skeptical of these online services. How accurate are their estimates? Would it stand up to an IRS audit? I've heard horror stories about people getting hit with huge tax bills because they couldn't prove their basis.

They use a combination of public records, historical property value databases, and specialized algorithms to establish reasonable cost basis. They access county records, historical MLS data, and comparable property sales from the time period. The system can often pinpoint purchase dates and prices even when you have minimal information to start with. Their reports are designed to be audit-resistant and include all the documentation and methodology used to establish the figures. Each report shows how they arrived at the values, which creates a strong paper trail for the IRS. Their team includes former IRS agents who know exactly what documentation is required to survive scrutiny. I was actually audited on one property sale and their documentation was accepted without any issues.

Wait, you're saying there's a service that waits on hold for you? How does that even work? I spent 3 hours on hold with our county last week and eventually gave up.

This sounds too good to be true. I've been trying to get property records from my county for months. They never answer phones and their online system is from 1995. You're telling me this service actually gets a human on the line? I'll believe it when I see it.

The service uses a system that dials in and navigates through all those annoying automated menus for you. They basically wait on hold in your place, and when they finally get a human on the line, they call your phone and connect you directly to that person. No more waiting on hold or repeatedly calling back. It's particularly useful for county offices and government agencies that are chronically understaffed. The system monitors the hold music and waits as long as necessary - I've had them wait over 2 hours for me before. When you consider how much your time is worth, it's definitely worth letting them handle the waiting. It's especially helpful when dealing with multiple counties if your properties are in different locations.

That's a good idea, though I'm not sure if he used the same agent for all properties. He did have the same insurance company for everything though. Would the insured value typically be close to the purchase price? And would they keep records going back that far?

Insurance values aren't exactly the same as purchase prices, but they can help establish a reasonable range for the property value at the time. Most insurance companies maintain records for 7-10 years, but larger companies often have archives going back much further, especially if the policies have been continuously active. When you contact them, specifically ask for the "policy inception documentation" which would show the initial coverage amount when the policy was first created. This won't give you the exact purchase price, but it provides supporting evidence of approximate value that can help substantiate your cost basis claim to the IRS. Even establishing a conservative estimate is better than having no documentation at all.

Stepped-up basis only applies if the property was inherited after someone died. From the original post, it sounds like the father purchased these properties himself and still owned them when he had the stroke. The OP is helping manage finances but the father is still alive, so stepped-up basis wouldn't apply yet.

These are really helpful suggestions! I hadn't thought about property management companies at all. My dad was pretty hands-on with his rentals, but now that you mention it, I vaguely remember him mentioning using someone to handle things when he went on that cruise a few years back. The bank records idea is brilliant too - he's been with the same credit union for decades and did refinance at least one property during the low interest rate period. Even if the original mortgages are long paid off, those refi documents would have all the property details. Do you know if there's a specific timeframe banks typically keep mortgage records? And would I need any special authorization to access his old loan files, or would a power of attorney be sufficient?

Banks typically retain loan records for 7-10 years after the loan is closed, but larger institutions often keep them much longer in their archives. Credit unions especially tend to maintain member records for decades since they have smaller customer bases and longer relationships. A power of attorney should definitely be sufficient to access your father's loan files - that's exactly what POAs are designed for. Just make sure it's a durable power of attorney that specifically includes financial matters. Bring a certified copy when you visit the bank, along with your ID. The refinancing records will be especially valuable because they'll contain not just the original purchase price, but also any improvements that were factored into the property value at the time of the refi. This can help you establish both the initial basis and any additions to basis from capital improvements your father made over the years. Also, if he used the same credit union for multiple properties, they might have a complete portfolio view of all his real estate transactions, which could help you piece together the timeline and values of his entire rental property business.

This is really comprehensive advice, thank you! The reconstructed records approach gives me some peace of mind - I was worried that without exact documentation I'd be completely stuck. I've already started documenting my search efforts after reading the earlier suggestions about county records and bank files. One question about the title insurance company approach - would I need to contact every title company in the area, or is there usually one dominant company that handles most transactions? Also, when you mention getting appraisals for historical values, would those need to be done by certified appraisers, or are there other ways to establish reasonable estimates for what properties were worth 20+ years ago? I'm feeling much more optimistic about this whole situation now. It seemed impossible when I first posted, but there are clearly more options than I realized.

For title companies, I'd suggest starting with 2-3 of the largest/oldest companies in your area rather than contacting every single one. You can usually find out which companies have been operating the longest by checking with your state's insurance department or local real estate association. These established companies are more likely to have extensive historical records. Regarding appraisals for historical values, you have several options beyond certified appraisers (though those would be the gold standard). You can use: automated valuation models that show historical data, real estate websites that track historical property values, or even evidence from comparable sales in the area during the time period your father likely purchased. The key is using multiple data sources to support your reasonable estimate. For what it's worth, I've seen the IRS accept cost basis reconstructions based on much less documentation when taxpayers could show they made genuine efforts to locate records. Your situation with your father's stroke and poor record-keeping is exactly the type of circumstance where the IRS tends to be more accommodating, especially if you can show you've exhausted the reasonable avenues for finding the original information. Keep documenting everything - even dead ends help demonstrate your good faith effort. You're definitely on the right track now!

This is such great advice about checking building permits! I never would have thought of that. My dad was actually pretty particular about maintaining his properties - I remember him mentioning putting new roofs on a couple of them and updating some electrical systems over the years. The building department route seems especially promising because those records would be completely independent of anything my dad kept (or didn't keep) personally. And you're right that improvements to basis could make a huge difference in the tax calculation. I'm curious - when you went through this with your father-in-law's properties, were you able to piece together enough information to satisfy the IRS? Did you end up needing to use the reconstructed records approach, or did you find enough actual documentation? I'm trying to get a sense of how much evidence is typically "enough" in these situations. Thank you for sharing your experience - it really helps to know that others have successfully navigated this same nightmare!