When does cost basis start for inherited stocks - father's death in 1985 or mother's death in 2015?

The correct answer is closest to #3. For inherited assets like stocks, the cost basis is generally the fair market value (FMV) of the stock on the date of death of the person from whom you inherited it - this is called a "step-up in basis." When your uncle died in 1992, your aunt inherited the shares and received a step-up in basis to the FMV on the date of his death. When your aunt passed in 2018, you and the other heirs inherited the shares from her, and received another step-up in basis to the FMV on the date of her death in 2018. This means you only owe capital gains tax on any appreciation from your aunt's date of death in 2018 until the date you sell the shares. The appreciation that occurred between your uncle's death in 1992 and your aunt's death in 2018 is not taxable to you or the other heirs.

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Just an FYI - if the company was acquired but the stock hasn't been converted to cash yet, make sure you keep very detailed records of the acquisition terms and any communications. The acquiring company should provide documentation showing the conversion rate/value, and you'll need this to properly establish both the 2018 value and the final sale value. Also, don't forget that inheritance tax and capital gains tax are two different things. You might not owe inheritance tax (depends on the total estate value and your state), but you'll still potentially owe capital gains tax on any appreciation after your aunt's death.

Has anyone dealt with a situation where the original shares had stock splits between the first death and second death? My parents had a similar situation but there were 3 stock splits between my dad's death and mom's death, and I'm having trouble figuring out how to calculate everything correctly.

This is exactly the kind of complex inheritance situation where getting professional help is worth every penny. Based on what you've described, Yuki is correct - the cost basis should step up to the fair market value at your aunt's death in 2018, not your uncle's death in 1992. However, determining that 2018 value for a non-publicly traded company is going to be the challenging part. Since the company was acquired in 2023, you might be able to work backwards from the acquisition price, but you'll need to account for any changes in the company's value between 2018 and 2023. I'd strongly recommend consulting with both a tax professional and potentially a business valuation expert. The amount of tax you could save by getting the basis calculation right will likely far exceed the cost of professional help. Plus, having proper documentation will protect you if the IRS ever questions your return. Don't let this sit too long - there may be deadlines for claiming certain elections or filing estate-related forms that could affect your tax situation.