On further reading I gather that for figuring the cost basis for depreciation I need to use the LOWER of (1) fair market value at the time I converted the property to a rental, or (2) my original purchase costs for the property + improvements/losses, etc. Since I've owned the property for 5 years before renting it, and it appreciated quite a bit in that time, it appears I'll end up having to use the adjusted cost basis anyway as it is lower than fair market value.
