Depreciation of rental property is based on the LOWER of what you paid for it, or the FMV at the time the property was placed in service. But your loss or gain on the property is based on what you paid for it, minus depreciation taken.
Generally for depreciation, what you paid for the property will always be less than the FMV of the property at the time it was placed in service. However, the housing marking crash of 2008-9 makes that statement not true for everyone.
