Hi guys it's in PUB 544, on page 4.
Gain. If you have a gain on the sale, you generally must recognize the full amount of the gain. You figure the gain by subtracting your "adjusted basis" (price you paid plus improvements) from your amount realized (sale price), as described earlier.
What this means is that you only pay a gain if your sale price is more than the price you paid (not FMV at the time of conversion).
But in order to take an ordinary loss on your return, you may be excluded from doing this if the FMV was less than your adjusted basis at the time of converting your rental.
I hope that helps.
