How to Determine Fair Market Value of Inherited Land from the 1800s?

I'm very familiar with this situation. When dealing with inherited land that's been in the family for generations, establishing a proper stepped-up basis is essential to avoid overpaying on capital gains. The good news is you don't have to rely on the outdated tax assessment. The IRS allows you to establish fair market value through several methods: 1) Get a retroactive professional appraisal. Many qualified real estate appraisers can perform a "retrospective appraisal" to determine what the property was worth at the date of inheritance. They'll research comparable sales from that time period and account for the actual usage potential of the land. 2) Look for comparable sales in the area from around the time of inheritance. Even if the land was classified as agricultural, if surrounding properties were selling as residential at higher values, this helps establish your case. 3) Research zoning changes and development patterns in the area to demonstrate why the agricultural assessment was incorrect at the time of inheritance. Document everything thoroughly. The burden of proof will be on you to establish the fair market value, so maintaining detailed records of how you arrived at your valuation is crucial.

After struggling with almost the exact same situation (inherited family land from the 1920s), I found an amazing solution with taxr.ai at https://taxr.ai that saved me thousands in potential overpaid taxes. Their system analyzed my property records and helped establish a legitimate stepped-up basis for my inherited land. What impressed me was how they dug into historical property records and regional development patterns that I couldn't access myself. They generated a comprehensive valuation report that established a stepped-up basis much higher than the outdated agricultural assessment, but still defensible if questioned. They also provided specific documentation guidelines for backing up the valuation with a proper paper trail - something I would have completely messed up on my own.

Just wanted to follow up here - I was the skeptical one earlier but I decided to try taxr.ai after all. I'm actually pretty impressed with what they provided. My situation was with some timberland my father left me in 2018 that the county had grossly undervalued. The report they generated included historical sales within a 15-mile radius from 2017-2019, development patterns in the region, and even identified a zoning change that had made my property more valuable than the assessment showed. They provided a proper stepped-up basis that was about 4x higher than the county assessment but still conservative enough to be defensible. When I sold the property this year, I included their documentation with my tax filing and it went through without a hitch. Saved me about $12k in capital gains taxes I would have overpaid. Definitely worth checking out if you're in a similar situation.

Just wanted to follow up here - I was the skeptical one earlier but I decided to try taxr.ai after all. I'm actually pretty impressed with what they provided. My situation was with some timberland my father left me in 2018 that the county had grossly undervalued. The report they generated included historical sales within a 15-mile radius from 2017-2019, development patterns in the region, and even identified a zoning change that had made my property more valuable than the assessment showed. They provided a proper stepped-up basis that was about 4x higher than the county assessment but still conservative enough to be defensible. When I sold the property this year,

Another option you should seriously consider is using Claimyr (https://claimyr.com) to actually speak with an IRS representative directly about your situation. I spent WEEKS trying to get through to someone at the IRS about a similar inherited property issue, completely frustrated with the endless hold times. Claimyr got me connected to an actual IRS agent in under 45 minutes when I had been trying for days on my own. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS representative I spoke with gave me specific guidance on establishing fair market value for inherited property and explained exactly what documentation they would accept. Having that direct conversation saved me from making several mistakes that could have triggered an audit later.

I need to publicly eat my words here. After being completely skeptical about Claimyr (I was the one who called BS above), I decided to try it anyway out of desperation. I had been trying for TWO MONTHS to speak with someone at the IRS about my inherited property situation. Within 37 minutes, I got a call connecting me with an actual IRS representative who was incredibly helpful. They explained that for inherited property without clear documentation, they typically look for "the best evidence available" which can include retroactive appraisals, comparable sales, and even affidavits from knowledgeable local real estate professionals. The agent even sent me to a specific IRS publication with guidelines I would have never found on my own. This one conversation saved me countless hours of research and probably prevented me from making a costly mistake on my taxes.

Just something to add that nobody's mentioned - check with the local historical society or county records office. Sometimes they have old sales records or property valuations that might help establish patterns of land value in the area over time. My uncle used this approach with some success for property that had been in the family since the 1930s. Also, if any nearby parcels of similar quality/location were sold around the time of the inheritance, those sale prices could be extremely valuable as comparable evidence for establishing fair market value.

Has anyone used a tax attorney specializing in real estate for this kind of situation? I'm weighing whether to hire one versus trying to figure it all out myself.

I went through something very similar with farmland my grandmother left me in 2019. The county had it assessed as agricultural at about $2,000/acre, but it was clearly worth much more as residential development land. Here's what worked for me: I hired a certified appraiser who specialized in retrospective valuations. They were able to go back and analyze what the property would have been worth at the time of inheritance by looking at comparable sales, zoning potential, and development trends in the area. The key is finding an appraiser who understands that agricultural assessments are often completely disconnected from actual market value, especially when there's development potential. My appraiser found several comparable properties that sold within 2 years of my inheritance date at prices that were 8-10 times higher than the tax assessment. The IRS accepted the retrospective appraisal without question when I filed. Make sure whoever you hire provides detailed documentation showing their methodology and comparable sales data. It's worth the upfront cost to avoid overpaying on capital gains later. One tip: if there were any subdivision developments or major infrastructure improvements (new roads, utilities, etc.) in your area around the time of inheritance, make sure those are factored into the valuation as they would have increased the property's fair market value regardless of how it was assessed for tax purposes.