How to determine cost basis? Help!

[Whit Hill]

My husband and I have just sold our longtime home in Michigan. We moved to Tennessee in 2008 and have been renting it out for the past 7 years.  Here are the basics: We bought it for 130K 20 years ago and just sold it for $425K. After the dust settles, we plan on buying a small rental here in TN. We researched the 1031 Exchange but didn't feel it would meet our needs. So we are planning for a hefty capital gains tax bill next year.

Our accountant has explained to us that in order to figure out what we owe in taxes, we need to figure out the cost basis for the Michigan house -- adding up all the major improvements we did while we lived there (roof, kitchen, two bathrooms, turning a garage into a studio, etc.)

He seemed to think that the IRS will NOT question us about these improvements or ask for proof, receipts, etc. -- that you can basically come up with a figure. Is this true? We certainly do not have any kind of accurate paper trail for all the stuff we did to that house over all those years. 

Obviously, we want the cost basis to be as high as possible, reflecting the work we did. How do others handle this situation? 

Is there any other aspect of mitigating the tax that we might have overlooked? THANKS!