The IRS says in this Publication on page 12:
Property changed from personal use
If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following.
1. The FMV of the property on the date of the change in use.
2. Your original cost or other basis adjusted as follows.
- Increased by the cost of any permanent improvements or additions and other costs that must be added to basis.
- Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis.
So, in any case, you cannot use a value higher than your adjusted cost, even if the property is valued more at the time you bought it or at the time you rented it. On the other hand, if the fair market value has decreased at the time of rental, you have to use the lower value.
The value would have to be allocated between improvements (the building) and land. Land is not depreciable.
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