- Do they continue the existing depreciation schedule (26.5 years left)?
No.
- Do they start a new depreciation schedule (27.5 years) with the new adjusted basis after that first 1-year rental?
Yes. The new cost basis on the structure only, will be the prior cost basis on the structure only, minus the prior depreciation already taken.
- Did either conversion [(1) rental property to personal use and (2) personal to rental] trigger the need to record and use the then-current market value of the property for depreciation purposes?
Not likely. When the property is placed in service you depreciate based on the *LESSER* of a) what you paid for the property or b) the FMV of the property on the date placed in service. Since I doubt the FMV today is less than what you originally paid for the property, it's FMV today is irrelevant and does not come into play for anything.
- Are there other considerations?
Understand the cost basis originally assigned to the land will not change. Only the cost basis of the structure and any other assets on which prior depreciation has been taken will change. The cost basis of the structure and any other assets depreciated in the past will be reduced by the amount of that depreciation already taken. Then depreciation starts over from day 1 for the next 27.5 years.
