Please clarify your statement "title transferred at sale to new buyers - never assumed ownership," What do you mean by that? Was the title to these properties never transferred to you?
I ask, because if not, then you didn't inherit it. I suspect more than likely that the property(s) were placed in an estate after the original owner(s) passed, and then sold. That would mean the sale would be reported on the 1041 estate tax return.
is there a best way to determine FMV?
The best way is to have the property(s) appraised by a licensed, qualified, certified property appraiser as soon as possible upon the passing of the original owner. The IRS will not challenge that.
planning to use tax assessed value for 2021
You can't do that and I would highly discourage it if you could. The property tax appraisal value is almost always "at least" 30% below the FMV of the property. Using the tax value results in a higher taxable gain on the sale when you do that.
More than likely the bank that approved the loan for the buyer required an appraisal on the property. If you can get that, (it might even be in the package you received at the closing on the sale) then that's your proof of FMV and is the figure you should use as the cost basis for reporting the sale.
