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Because this is considered now a business property you will be able to deduct the loss but keep in mind that you will have to account for the depreciation you have been taken, which according to my calculation will be around 20K. You would have to check your return for the exact amount. Let's assume you will sell it for 160K and it will cost you additional 8K to sell it (closing cost and RE commission), you will end up with about 27K loss assuming that the fair market value of the house in 2012 was still 199K.
If the fair market value was less than that, lets say 189K, your loss would be 17K. There are too many variables to give an exact number, but basically, if you are selling a rental property with a loss your starting point will be your
purchase price + pre-renting improvements OR fair market value on the day of conversion (whichever is smaller) + expenses of sale - depreciation = adjusted basis.
Adjusted basis - sales price (not the net proceeds) = capital loss.
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