How to find property cost basis when original purchase price is unknown? Tax implications for selling inherited rentals

Property records are actually publicly available in most counties! Start with the county assessor's office where each property is located - they should have deed records showing when your father acquired the properties and possibly the purchase prices. Their websites often have property search functions where you can look up historical ownership records. You can also check with the county recorder's office, as they maintain records of all property transactions. Request copies of the original deeds and settlement statements if possible. Title companies that handled the closings might have records too, though they may not go back decades. If these options don't give you complete information, you can use alternative methods allowed by the IRS to establish a reasonable cost basis. You might be able to use comparable sales from when your father purchased the properties or have a retrospective appraisal done to estimate the value at time of purchase.

I was in a similar situation last year with my uncle's properties. I tried everything but couldn't find solid documentation. I ended up using taxr.ai (https://taxr.ai) which was super helpful. They analyzed what limited docs I had and helped establish a reasonable cost basis using their AI tools. They can extract information from partial records and even helped me find some county assessment data I had missed. For one property, they suggested looking at mortgage documents which ended up having the original purchase price listed! Saved me from potentially overpaying thousands in capital gains taxes. Their document analysis found patterns I wouldn't have noticed myself.

I was totally wrong about taxr.ai! After my skeptical post, I decided to try it anyway since I was desperate with my grandfather's lake house situation. The tool actually found the original purchase information by connecting some dots I never would have put together. They discovered the property had been refinanced in 1993, and those loan documents had the original purchase price from 1981! They also showed me how to properly calculate the depreciation that had been taken over the years (something I hadn't even considered). This significantly reduced the taxable gain. The documentation package they provided looks rock-solid for audit purposes. I'm actually relieved now instead of stressed about getting flagged by the IRS.

For those struggling to reach the county offices for property records, I used Claimyr (https://claimyr.com) to get through to our county assessor when I was dealing with my parents' old farm sale. I was on hold forever trying to reach someone who could help me access historical property records. Claimyr got me connected with an actual human in the records department in less than 20 minutes. Check out how it works here: https://youtu.be/_kiP6q8DX5c. The person I spoke with guided me through their archival process and emailed me digital copies of the original deed and transfer documents from 1978. Those documents had the original purchase price and saved me from major tax headaches.

I have to eat my words about Claimyr. After my skeptical comment, I tried it because I was desperate to reach our county recorder's office about my mother's property records. I was shocked when I got a call connecting me to an actual human at the county office after being notified they were just about to answer. The service saved me from waiting on hold for what ended up being 3.5 hours (I could see the wait time in their system). The county clerk I spoke with was able to pull up the complete transaction history on my mom's property going back to 1967! They emailed me copies of the deed with the original purchase price clearly shown. This one phone call solved my cost basis problem completely.

If you absolutely can't find the original purchase price anywhere, another approach is using the "stepped-up basis" rules if any properties were inherited rather than directly purchased by your father. Under those rules, the basis would be the fair market value at the date of the previous owner's death, not the original purchase price. Also, check his tax returns from previous years. The Schedule E forms would show depreciation taken on rental properties, which can help reconstruct the original basis. If he had an accountant who prepared his taxes, they might have records too.

Don't forget to check if your father had a safe deposit box or if there's a filing cabinet somewhere with a "property" or "real estate" folder. My dad was also terrible with records but had one secret place where he kept all important documents. Also, if he worked with a specific realtor for these purchases, they sometimes keep transaction records for longtime clients. Worth tracking down if you know who he worked with.

I went through something very similar with my grandmother's properties after she passed. One thing that really helped was checking with the title insurance company that handled the original closings. Even if it was decades ago, many title companies keep their records digitally archived now and can pull up the original HUD-1 settlement statements that show exactly what was paid. Also, don't overlook homeowner's insurance records if your dad kept those. Insurance companies often have the original insured value when the policy was first written, which can give you a ballpark estimate of the purchase price from that time period. If you're still stuck, consider hiring a forensic accountant who specializes in estate tax issues. They know all the tricks for reconstructing financial records and can provide documentation that will satisfy the IRS. It might cost a few hundred dollars but could save you thousands in overpaid capital gains taxes.