The questions asked by the software allow me to specify that we converted a residence to a rental. but nowhere do I encounter a place to enter the Fair Market Value to establish the basis. It only lets me fill in the date of the purchase and the original cost. This would overstate the depreciation basis by quite a bit.
Whenever you sell the property, TurboTax is not set up well (or at all) for that situation, so you may consider a tax professional whenever you sell the property.
When you converted the property from personal use to rental, the basis for depreciation was lower of the Adjusted Basis or the FMV on the date of conversion.
Now that you are selling, it gets a little trickier.
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