I am looking for help on a situation that I am confused with when calculating capital gains tax. What I am not sure of is what should be used for the cost basis of the property. I lived in the home and converted it to a rental however I did NOT live there for 2 of the last 5 years it has been rented out the last 8 years.
When speaking to a local tax accountant they said I have to use the FMV of the house at the time it was converted to a rental. This does not seem right to me since I bought the home for 186000 and at the time i converted it to a rental I owed around 160,000 on the property. Due to the market crash back many years ago at the time I converted it to a rental the FMV was 105,000.
It is my understanding from what I am reading online that FMV should only be used when claiming a loss on the property. For my situation I sold the home for $200,000 do I really need to claim 95,000 in capital gains for a home I did not gain 95,000 from?
Keep in mind these are rough numbers as I know there are things that need to be added in like repayment of depreciation and sales costs and things like that but for the starting number do I need to use the FMV at the conversion time or the purchase price of the home?
