Worst tax consequence of Rental Sale

[Jason Thomas]

Ive been trying to confirm the tax consequence of selling my rental unit and am so far astounded at the negative tax implications ive found.  I purchased this unit in 2001 for $400k and converted it to a rental in 2005 when its Fmv was $750k.  Im now considering selling it in 2016  for around $750k.  What ive found is that the adjusted basis on the gain is calculated from the original purchase price and not the Fmv from when it was converted.  This seems ridiculous since all the gain was from when we used to live in it.  Is this really the case??  What are my best options besides a 1031 exchange.  Is it possible to sell the rental and have the money distributed to me in a note over a 5 year period so that my capital gain tax is reduced since im retired and have no income and would fall into a 0% tax bracket up to 70k in taxable income a year??  Any other possible loopholes?