Since you did not (because you could not) use the original cost basis to depreciate the property while it was a rental, you flat out can not report the sale in the Rental & Royalty Income (SCH E) section of the program. That'sw because the program will be basing your loss/gain on the adjusted cost basis used for depreciation, which we both know is wrong.
You have no choice but to report the sale in the "sale of business property" section. Pay attention so that you select NO on the first screen, since you did not sell the property at a gain.
