15 years ago I purchased a home for $200k that served as my primary residence for 10 years, during which time it appreciated approximately $200k. It was converted to a rental 5 years ago, has appreciated another $100k in that time, and I have not lived in it for any 2 of the previous 5 years. Must I use the original purchase price as the cost basis to calculate capital gains on the sale of this rental property, expected to sell for about $500k, or may I use the FMV at the time it was converted into a rental, thus reducing the gains by $200k during which it was my primary residence? (note, for simplicity I am using round numbers that closely reflect my situation).
