Personal residence converted to rental

[mircpa]

Have a client who owned custom kind of personal residence in IL from 2001 until August 2016 when he started renting and eventually sold in Sep 2018. I know I am suppose to look for FMV at time of conversion for calculating gain or loss. Since this is kind of custom house I cannot find comparable home values during August 2016. I looked at county website which shows assessed value which is way less than original purchase price. Can someone points me to any website or source where I can get an idea of FMV of this house in past August 2016.

[jklcpa]

For the depreciable basis:  In converting a personal residence to a rental, the basis for depreciation is the lower of (1) the adjusted basis on the date of conversion, or (2) the property’s fair market value (FMV) at the time of conversion (Regs. Sec. 1.168(i)-4(b)).

Remember to break out the nondepreciable land component from both the total adjusted basis of the property and from the FMV so that the amounts used in #1 and #2 above are only the depreciable components in deciding which is the lower amount.

 

To calculate gain or loss on sale:  

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.

Taken from a Tax Advisor article

[mircpa]

I know we are suppose to go with lower of cost of FMV at date of conversion. Client listed this property for sale in August 2016 i.e. time of conversion. My question can listing price be regarded as FMV at date of conversion ?

Thanks

[Lion EA]

Did it sell at a profit? Look into the exact dates to see if it was a primary residence for two out of the five years prior to the sale date.

It took over two years to sell, so the listing price might not have been the FMV on the listing date. If you're looking at a lot of money, then your client might want a qualified appraisal.

[mircpa]

He sold for a huge loss. Listing price was less than original cost. Do you think then I can take listing price as cost at time of renting. Thanks to all

[Gail in Virginia]

How was listing price decided?  I can list my house for a million dollars, but that doesn't mean it is worth any where close to that.  However, if I consult a realtor and she gives me a list of comps, and assets/liabilities for my house compared to the comps and suggests a listing price - that might be close to market value. 

[mircpa]

Client found lease contract which was executed in August 2016 who also has option to buy at listing price. So I will go with listing price as FMV at conversion.

[BLACK BART]

10 hours ago, mircpa said:

Client found lease contract which was executed in August 2016 who also has option to buy at listing price. So I will go with listing price as FMV at conversion.

https://www.youtube.com/watch?v=onWf4_yl-pY

They say always go with your first instinct.