CAPITAL GAINS BASIS FOR SALE OF RESIDENTIAL CONVERTED TO RENTAL PROPERTY: Property rented for more than 5 years. Original purchase 2005 purchase...

How It Works

Get an answer in three easy steps. Here's how it works...

Ask Your Question

1. Ask Your Question

Enter your tax preparation question at the top of this page and click Get An Answer.

Pick Your Priority

2. Pick Your Priority

Tell us how quickly you want your tax preparation question answered.

Get An Answer

3. Get An Answer

Connect with your tax preparer via online chat or telephone call.




Property rented for more than 5 years.

Original purchase 2005 purchase price plus improvements is 117,000.

The “In Service” 2009 Fair Market Value is 96,144.

Property sold 1/2018.

Can I use original cost plus improvements (117,000)for the cost basis? Or do I have to use the “lessor of the two” 96,114?

Last updated
Victor Santucci EA
Tax Preparer

Hello and welcome to! My name is Victor Santucci EA and I'm going to do everything in my power to answer your question to your full satisfaction!

I’m available to chat now. Please let me know that you are ready by posting a response. I’ll leave my chat session open for the next 15 minutes or so and wait for your reply. If I don’t catch you this time, please respond with a few times (including your timezone) that work best for you and we can connect then.

Last updated
Victor Santucci EA
Tax Preparer


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.

Victor Santucci  EA


Victor Santucci EA
Tax Preparer


Do you need further assistance with your original question?

Victor Santucci



About ExpertHelp

ExpertHelp is changing the way you connect with service professionals.

Whether you have a quick question while preparing your taxes, troubleshooting a computer problem, or need to hire an attorney, ExpertHelp is the most convenient and affordable way to connect with the right service professional to get the job done.

ExpertHelp has been in business since 2011, is an A+ Rated Better Business Bureau accredited member, and offers a 100% satisfaction guarantee on every question you ask!

More Tax Preparation Questions...

Ask Your Tax Preparation Question & Get An Answer Now!