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So the tricky part is coming up with a FMV.

I'm going to stop dancing around the obvious and note that you didn't take care of business when you converted to rental, did you? That was the time you needed to ascertain FMV. Otherwise how would you be able to come up with a depreciable basis?

I strongly suggest that you hire help for your 2012 return. I did that when I sold a rental with a lot fewer complications than your situation. I have no special knowledge, but the people at the IRS aren't idiots, and I suspect they're well aware that a lot of homes were put into rental service after the market collapsed. This is easy pickings for them if you get it wrong.

For lurkers, to me going into the landlord business is just like going into any other buisiness. IMO it's downright foolish to do so without hiring some advice. Once everything's set up it's pretty simple until you sell, but in the beginning and the end, Accountant in a Box just isn't going to cut it.

Rule Your Retirement Home Fool
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