A recent case focuses on depreciable basis of converted rental property. Under the tax law, if property that was not originally held for the production of income is subsequently converted to such use, then the property’s tax basis for computing depreciation is the lesser of fair market value or adjusted basis on the conversion date. Here, a man bought a home in 2002, converted it to a rental in 2017 and deducted depreciation on his tax return. But he lacked the records to support the depreciable basis for the 2017 conversion of the property to a rental. He didn’t know the fair market value in 2017 or the property’s adjusted tax basis. So the Tax Court nixed the depreciation deduction (Smith, TC Memo. 2025-24).