After conferring with my colleagues, I need to edit my original answer. Pursuant to 26 CFR § 1.168(i)-4 - Changes in use. | CFR | US Law | LII / Legal Information Institute (cornell.ed... and from the posts that CollenD3 and AmeliesUncle has posted, I must revise my original answer but in simpler terms.
- You will begin depreciating the property as of April 1, 2020., which is the date you placed it into service.
- For the depreciable basis, you will use either your adjusted basis in the property or the Fair Market Value (FMV), whichever is less. You may still use the 27.5 straight-line depreciation method.
- You will need to reduce your depreciable basis by the amount of depreciation you have already taken. It mentions in that Cornell University link that included above that "Upon the conversion to personal use, no gain, loss, or depreciation recapture under section 1245 or section 1250 is recognized. However, the provisions of section 1245 or section 1250 apply to any disposition of the converted property by the taxpayer at a later date." This means that the depreciation recapture will be implemented if you dispose or sell the property later on. Meanwhile, all your deprecation you already taken previously is captured by reducing your depreciable basis in this latest conversion.
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