What is the basis for sale of rental property if the FMV at conversion(233K) was below the purchase price? Purchased home at 318K and we lived in it initially.

[banerjee_raja]

I dont think Turbotax is handling this correctly. 

We have 43K depreciation taken during the time it was rented out.If I input 275K as the net proceeds from the sale TurboTax is showing a huge tax bill jump. Elsewhere I read the special basis rules apply when FMV at conversion < Original cost.

My understanding is that I will not be allowed a tax loss but I should not be taxed as if it was a gain. Can someone please shed some more light on this?

[kerriP · Accepted solution]

Basis for rental property converted  from personal use, is the LESSER of the Fair Market Value on the date of conversion or your adjusted basis (cost plus any adjustments). So with the information you have provided, your adjusted basis to compute gain or loss is $190,000.  ($233,000-$43,000)  

Are you sure about FMV at conversion?  Is this what you have been using for depreciation? What about the value of land? (if there is any land) because you do not depreciate land, I was wondering if the land value was overlooked?  

[banerjee_raja]

Thanks KerriP, This is a condo. No land associated.

Please take a look at the following links and let me know if I can apply it in this case

<a rel="nofollow" target="_blank" href="https://www.kahnlitwin.com/blogs/tax-blog/converting-a-personal-residence-to-a-rental-property">http...>

<a rel="nofollow" target="_blank" href="https://www.marketwatch.com/story/want-to-convert-your-home-into-a-rental-property-here-are-the-tax-...>

<a rel="nofollow" target="_blank" href="https://ecohencpas.com/consider-taxes-before-converting-your-home-to-a-rental-property/">https://eco...>


Thanks
Raja