Thanks I really appreciate your help. I believe I understand it quite better now. This topic is confusing and should be simplified in the tax code. In theory, someone that knows better could have kept it for sale and rental for the entire year, if it did not rent nor sale, then on December 30th decide to take it out of rental (dispose of). All the losses including depreciation for the year would have been deducted in Schedule E, except for that 1 day. They would have then be allowed to select "dispose of" for that year as well. On the following year (2016), then was sitting on the market for sale only, until the date of sale. Then for 2016, if the house sold, report the sale of the property and related expenses on Schedule A.
