@TaxInCal wrote:
it deduct the depreciation from the cost basis and treat it as a capital gain, which I don't think is accurate.
Why do you think it is not accurate? That sounds right to me.
The gain due to depreciation is a Capital Gain, but it is a special kind of Capital Gain that is taxed at ordinary tax rates, up to 25%. That gain due to depreciation should show up on line 19 of Schedule D.
