Here's the bottom line. Based on what you have explained, and because this was a conversion from personal use to rental use, when you started renting this property the fair market value (FMV) was lesser than your actual cost when you added the renovations (and other expenses of purchase). Under the tax law you must use the lesser amount (FMV vs cost) and you are not allowed any additional depreciation for those years for the reason stated.
Now you come to the sale of your condo. The sale, under tax law, allows you to use your actual cost to arrive at the correct gain. In your case it's handled differently because you cannot adjust your depreciable basis to make this adjustment. Do not alter your depreciable basis for 2022 or any prior year.
The easiest way to handle it now, in the software, is to figure out the cost basis that you were not able to use as part of your cost basis on the depreciation for the condo.
Add that figure to your selling expenses and keep a record of how you arrived at that amount. The gain or loss will be reflected accurately when you take this approach. The depreciation that was used will be accounted for accurately as well. The credits should also be reflected in the selling expense which will reduce the selling expenses (increase gain since this is a negative adjustment to the purchase price).
You can feel confident to go forward with the information provided.
@Tax2019Pay
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