As you entered the rental you should have indicated it was CONVERTED then the question of the FMV and cost basis would have been addressed.
Where did you find this? I have schedule E open , schedule E worksheet and Asset Worksheet for the property? The only mention I see is Asset Entry worksheet line 2, 3 , and line 4, which only relates to date placed in service. and total cost of when assets was acquired.
Secondly,
If you have these kinds of questions I highly recommend you either upgrade to LIVE or seek out local professional guidance to be educated in the ways of the Sch E ... or read the IRS Publication 527.
I have tried a few weeks ago but unable to go to Live since I purchased the disk and they indicated no help unless I purchased the download .
Thirdly
Seriously, I question your financial acumen, since I very familiar with recap although this is my first vacation home/conversion to income property. I don't understand your statement: you want as much depreciation as possible, you don't need income, you want expenses not to exceed $25K, and as long as you can improve the property and writing off your income, than its the best of both worlds. Also it means the opportunity to purchase another home without worrying about qualifying with a vacation home properties for a new mortgage. And as to my original statement how on earth do you think with the cost basis at purchase price is a better deal than the cost basis of during conversion.
