First things, first. In answer to your first question, the answer is yes. You may use the higher cost value when you first acquired the property. Add costs of improvements to that cost and deduct all the depreciation from the time you purchased the home till you sold. See HERE for complete instructions on how to handle the sale of a rental property as in your particular situation in Turbotax. Remember we are using the purchase price when you initially bought the home in 2007.
When you first purchased the in 2007 for 324,009, you were supposed to have allocated 80% toward the cost of the home and 20% towards the land and taken depreciation on 80% from that amount.
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