Is my assumption correct that business equipment, such as tools or laptop, that are sold after being fully depreciated to zero after several years of use, count as a gain for ordinary income, to be reported on part III 4797 as section 1245 property?
Then is it possible to exclude that gain as foreign earned income on form 2555?
The issue is that I'm not sure the sale is "earned income" through professional services.
Does it seem unfair that the depreciation on the equipment counted as business expense, reducing foreign earned income, but the recapture of the depreciation cannot be excluded?
If instead only foreign tax credits can be claimed, would it be foreign branch, passive, or general category?