When you set up your property (and land) as a Rental Asset, your Cost Basis is what you paid for it, plus any capital improvements.
In your example, 250K would be your total Cost Basis for rental depreciation, with the Improvements at 210K (160K + 50K), and the land at 40K.
Even though the fair market value of the both the house and land has increased, this is not considered when using your Original Cost Basis for asset depreciation.
Here's more info on Rental Depreciation.
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