Foreclosed RE turn into rental

[BillV]

My client sold residential RE three years ago on installment sale basis.
Purchaser paid interest and principal first year and nothing since. Purchaser in the meantime rented out the home and received rent payments. My client finally foreclosed on the property last July 2010, but agreed with current tenants to continue as a rental. I am looking for basis of rental for depreciation purposes of rentall. Would it be the balance of the unpaid note? And what happens on the Form 6252?

Property was vacant investment property when my client initially sold it.

[JON]

You wish

it would be the balance of note. I still do not understand the question of turned into a rental. Was it a rental when it was intially sold? If it was a personal residence it may be different.

On a repo you are put back into the same position as if it was never sold. You recapture all principle payments as income (less any that was recognized as income already). Then you have your total basis and assign out costs to land, building etc.