Depreciation on house converted from primary residence to rental

[MarkAU]

For the actual Depreciation Worksheet, I am struggling to understand what numbers should be showing up here.

8. BASIS....

a. i. Total Original (cost) when property was acquired.........  $300,000

    ii. Portion of original basis for land.......................................$200,000

    iii. Original basis not for land (difference from above) .....$100,000

But for me, I bought the house in 2013 and lived there until lasy July when I converted it to a rental (and moved into a different rental myself). For illustrative purposes the FMV at conversion was say $500,000 which is more than the County assessment for land and improvements.

In IRS Pub 527 it  says:

Basis of Property
Changed to Rental Use
When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciationwill be the lesser of fair market value or adjusted basis on the date of conversion.

Fair market value. This is the price at whichthe property would change hands between a willing buyer and a willing seller, neither havingto buy or sell, and both having reasonable knowledge of all the relevant facts. Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property.
Figuring the basis. The basis for depreciation is the lesser of:
• The fair market value of the property on the date you changed it to rental use; or

• Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. For other increases and decreases to basis, see Adjusted Basis in
chapter 2.
Example. You originally built a house for $140,000 on a lot that cost you $14,000, which you used as your home for many years. Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. Part of the improvements qualified for a $500 residential energy credit, which you claimed on a prior year tax return. Because land isn’t depreciable, you can only include the cost of the
house when figuring the basis for depreciation.

The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land a nd $147,000 was for the house.

The basis for depreciation on the house is the fair market value on the date of the change
($147,000) because it is less than your adjusted basis ($164,000)

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So how do I calc the basis? 

Is the land basis based on when I bought it or when I converted it (look at the original or conversion time property tax assessment?)

Do I subtract the land basis from the FMV at the time of conversion?

Is the wording on the Depreciation sheet off due to the unusual situation (mid year conversion of primary to a rental)?

Thanks!

[Anonymous]

On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. The basis for depreciation on the house is the fair market value on the date of the change ($147,000) because it is less than your adjusted basis ($164,000)

you calculated its basis for depreciation purposes $147,000.   

now if 2019 was the year you converted to rental the date place into service is the date you put it up for rental. say it's 6/14/2019. TT would compute depreciation using a 27.5 year life about $5345/year but because it was put into service on 6/14 it been in service only  6.5 months (the mid-month convention is used- 1/2 month depreciation for the month placed into service ) so the $5345 is prorated  5345*6.5.12 = 2895

TT doesn't track is your cost basis for gain or loss

 if you were to sell the proceeds would be allocated between the land and building based on their relative fair market value on the date of sale.  the land has a cost basis of $14,000 your original cost.  the building has a cost basis of $164,000 less the depreciation taken on the rental.