this is from a thread from Tax Advisor
https://www.thetaxadviser.com/issues/2008/jul/convertingaresidencetorentalproperty.html#:~:text=If%2...
Calculating Gain/Loss on Subsequent Sale of Rental Property
If a residence converted to rental property is later sold at a gain, the basis in the converted property is the original cost or other basis plus amounts paid for capital improvements, less any depreciation taken. If the sale results in a loss, however, the starting point for basis is the lower of the property’s adjusted cost basis or FMV when it was converted from personal to rental property (Regs. Sec. 1.165-9(b)(2)). This rule is designed to ensure that any decline in value occurring while the property was held as a personal residence does not later become deductible on the sale of the rental property.
the reg
(b) Property converted from personal use.
(2) The loss allowed under this paragraph upon the sale of the property shall be the excess of the adjusted basis prescribed in § 1.1011-1 for determining loss over the amount realized from the sale. For this purpose, the adjusted basis for determining loss shall be the lesser of either of the following amounts, adjusted as prescribed in § 1.1011-1 for the period subsequent to the conversion of the property to income-producing purposes:
(i) The fair market value of the property at the time of conversion, or
(ii) The adjusted basis for loss, at the time of conversion, determined under § 1.1011-1 but without reference to the fair market value.
was this your principal residence for any 2 out of 5 years before the sale? if so, you may be entitled to a home sale exclusion. if it was your principal residence for less than 2 years out of 5 years before the sale you may be entitled to a partial home sale exclusion depending on the reason for the move.
these are situations that may be difficult to properly reflect in Turbotax.
