I sold a rental property this year that had losses in prior years as such I understand that I cannot apply those prior year losses to the gain on the sale of rental property this year but part of the losses that were not used in prior years was depreciation which is being deducted from the cost basis of the rental property to calculate the gain on the sale of the rental property. It doesn't seem right that I'm reducing the basis of the rental property and thus picking up more gain on the sale for depreciation I never got the benefit for. Does the basis for PA need to be adjusted to only account for the depreciation that was actually taken to reduce income?
