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[[What if you convert it to a rental property for 2 years and then sell it at a loss ?]]

As I explained a few posts back, when you convert the principal residence to a rental property, your BASIS in the rental property will be the LESSER of the cost of the original property OR the FMV of the property at the itme of the conversion. So if you hold it for ANY length of time, and it continues to decrease in value, you may have a deductible loss.

But if the value INCREASES after the conversion, it is possible that you'll have a taxable gain. In any event, the "loss" on the personal residence at the time of the conversion to the rental property would be lost.

Look back to my response to a similar question. It'll be worth your time to look.

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