I moved back into a house I had rented out. I understand that I can now take my losses that were not allowed due to high income since the property is no longer a rental property. Is that actually the case? Also, if the property is converted, is that considered a sale that I will have to calculate capital gains on since my adjusted basis is lower from taking depreciation? Or is the sales price just my adjusted basis?
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No. Your understanding is incorrect. You may take your carried suspended losses only when you FULLY DISPOSE of the property. You haven't disposed of the property by converting it back to personal use. A conversion of use is not a sale.
Your understanding is INCORRECT. Suspended losses get freed up when you DISPOSE of the property. You have not disposed of the property, you merely converted it.
Your losses remain suspended until you dispose of it. Read IRS Pub 527 (I think) for more details.
Gene E. Utterback, EA, RFC, ABA
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