It sounds like the original furnace was included as part of the Cost Basis of the entire house. In that case, you can 'separate' the furnace from the house.
You would determine the Fair Market Value of the furnace when it was started to be used as a rental, and subtract that from the Cost of the house. You would then create two 'new' assets: (1) The house with the lower Cost Basis (without the cost of the Old Furnace), and (2) the Old Furnace. You would allocate the "prior depreciation" between those two new assets based on the Basis of each of them.
You would then 'sell' the old furnace for $0, and you would delete the old house asset (which had the furnace built-in to it).
As Critter said, add the new furnace as a separate item.
