This occurs in AZ. I have a property that I purchased in 2007 and lived in until this summer. I currently have it on the market. However, it was bought in the bubble and will not return close to the amount of money I have in the property. I realize you can't use real estate losses of personal residence to offset income.

However, if I turn the home into a rental, is my basis of the property all of the money I have in it (purchase and upgrades), or does my basis become the FMV at the time I made it a rental? For example, if my basis is able to be $520k+/- as that is the amount I have ?invested,? then selling it at even $400k where I net $370k after commission and associated fees would leave me with a capital loss of $150k. If I can use that 150k to offset 150k of income, that would save me about $60k in taxes between state and fed. If this is the case, I need to make it a rental for some period of time that would qualify me to use my $520k as my basis. What is the amount of time that it would need to be a rental to qualify for this?

Thank you in advance for your input. And yes, I have left a message for my CPA. I am just entertaining an offer for purchase tonight that this information will greatly help decide what to do.