Amending old tax return on rental property. Tax benefits?

[Cooper B.]

About 2.5 years ago I purchased my first home and took advantage of the first time home buyer tax credit. The terms of the tax credit required that I live in the house as my primary residence for a period of 3 years.

Well, before I ever even moved in I got called out of town for my job. It was a long-term assignment so I ended up renting the house out so it wouldn't sit empty. When the tenant finally left (after I filed for eviction), the house was an absolute wreck. Since I couldn't move in before it was repaired, it sat unoccupied while I made repairs as well as all of the improvements I had planned on making.

In the mean time I got married. My wife had also received the first time home buyer tax credit, and I moved into her house. So when I finished repairs/upgrades to my own house I rented it out once again.

So I am now about 6 months from my 3 years being up. I believe that I need to pay back the tax credit since the house clearly is not my primary residence, but I am struggling to figure out the best way in which to do this.

I don't know all of the rules for this, but would it be possible to amend my 2010 return to pay back the credit then (basically as soon as I got it?). Then I could claim depreciation for half of 2010 and all of 2011 and 2012 which would help offset the repayment. Could I also deduct costs associated with repairs? Improvements? How about the loss incurred with a non-paying tenant? Add to this I have less than perfect records of what was spent on repairs and improvements. I did much of the labor but I hired some close friends as well and just paid them cash for their time.

It all seems very complicated and I'm not sure if it is worth the effort, or the expense of my accountant's time. (I'd value the house, not including the land, at $100k for depreciation purposes.)

Does anyone have any advice regarding this matter?