When you sell property, you calculate your gain or loss by taking the sales proceeds and deducting the selling expenses. Once you have done that step, you then deduct your basis in the property to determine whether you have a gain or loss. Now here is where it gets more fun, as your basis depends on how you acquired it.
If you purchase property, your basis is your original cost plus any improvements made to the property. That is not the case for you, so we will move on to other scenarios.
If you receive property as a gift from someone who is still living, then your basis carries over from him to you. Since your uncle was gifted the property by your grandfather, we need to know your uncle's basis in the property, and in order to do that we need to know how your grandfather acquired the property.
If your grandfather bought the property, then there is your starting point. You are going to need to find a way to figure out what he paid for it. You can research the property records at the courthouse and see if the sale was recorded.
If your grandfather inherited the property, then we have a new scenario. If you inherit property, generally your basis is stepped up to the date-of-death value. So you would then need to know the fair market value of the property at the time your grandfather inherited it. If that is the case, you would need to research what the value of the property was in the 1930s when your grandfather inherited it.
So we can conclude at this point that whatever basis your grandfather had in the property, that basis then transferred to your uncle, and then his basis transferred over to you. Keep good records of how you determine your basis in case you need to confirm how you came up with the number. And good luck on your search.
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