How to establish cost basis for capital gains after selling parents house

[user17765144402]

In 2010, my parents (jointly) transferred their property to my three sisters & I for the sum of $1. The house property was purchased & the house was built in 1953 (cost unknown). In 1995, a one-car garage was added to the property (cost unknown). Since then, I have found receipts for adding a chair lift ($3,600) in 2018, replacing the roof ($7,850) in 2023, installing a walk-in shower ($10,755) in 2024 and replacing the water heater ($900) in 2025. In addition, I've found a document that shows the fair market value of the property ($144,100) in 2010 as a result of a township revaluation. Both parents continued living in the house until dad passed in 2024 & mom moved to an assisted living facility in 2025. What would the adjusted cost basis be for determining capital gain for each of my three sisters & I?

[M-MTax · Accepted solution]

I am sorry for the loss of your father.

If the property was transferred to you and your three sisters outright (your mother and father were not on title) over 15 years ago, then you really don't have much of an argument for a life estate, expressed or implied. Further, your mother was alive on the date of the sale and still is alive to date.

As a result, you will likely have to use your parents' cost basis (in 1953) plus the cost of improvements over the course of the ownership of the house to measure your total gain on the sale. 

[fanfare]

"In 2010, my parents (jointly) transferred their property to my three sisters & I for the sum of $1"

That's a common error that is going to cost you alot.

@user17765144402 

[Mike9241]

for the cost of the house in 1953, you'll need to use either an appraiser or an accounting/CPA firm that has a valuation specialist.

to that cost add the cost of subsequent improvements. Not sure about the roof. It could be a repair which doesn't add to basis or an inprovemnet ot betterment which does 

The IRS does have the right to challenge the value

[M-MTax]

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@Mike9241 wrote:

for the cost of the house in 1953, you'll need to use either an appraiser or........

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Yeah, I agree 100%. 

HOWEVER, depending on the sales price, it might not be worth spending a whole lot of money on an appraisal. The sale is being split 4 ways, apparently, which would divide the basis by 4 (obviously). Applying a normalized inflation rate would imply an original cost in the neighborhood of $12,000 (or $3,000 for each sibling). That would save each a maximum of $600 in federal income tax and likely a lot less. A low ballpark figure (i.e., educated guess) may be more cost efficient).