Thanks! I need to look at Pub 551, but your response makes sense in retrospect and after doing some experimenting on my 2021 tax return. I have a confirmation question though about how to enter the adjusted basis in Turbotax.
I looked at my 2021 tax return in the 2021 version of Turbotax Premier (not online, the installed version on my computer) and don't see an "adjusted basis" field per se. Moreover, a "Confirm Your Prior Depreciation" section with a field for me to enter depreciation prior to 2021 (this is the cumulative depreciation that I apparently erroneously entered for 2001-2003) does not come up unless I enter 05/29/2001 (or some other 2001 date) as "Date I started using it in this business."
It sounds like I need to enter the adjusted basis in the Cost field (not in the Cost of Land) field in the "Tell Us About This Rental Asset" section instead of the actual purchase cost on 05/29/2001. When I do this and enter 05/29/2001 as the purchase date and 07/01/2021 as the date that I started using it in this business field the "Confirm Your Depreciation" section does not display.
I sounds like you are saying and I am assuming based on how Turbotax works after doing the above experiment on my 2021 tax return, is that I basically treat the condo as essentially being rented for the first time in 2021 instead of 2001. However, instead of entering my original cost from 2001 and depreciation in 2001-2003 and 2021, I enter the cost adjusted for any depreciation taken up to 2021 and then Turbotax will depreciate the cost (adjusted basis until 2021 cost, not my original 2001 cost) entered on my 2021 tax return in future years as a rental property.
