The basis in depreciation is the lesser of the normal adjusted basis and the FMV, on the date of conversion.
To complicate things further, when determining a gain or loss on the sale of a rental the normal adjusted basis is used for gains and the adjusted FMV is used for losses. Therefore, if you sell at a loss calculated by the normal adjusted basis method and a gain using the FMV method, then no gain or loss is recognized on your return.
Considering that the real estate crash wasn't that long ago, these historically rare instances of determining basis and calculating gains/losses are likely prevalent today.
