@jtax.
I have further reflected on my final point, and I maintain the position that depreciation only helps postpone the tax until the property is sold. Similar to your point on PAL that it is merely suspended, I guess my point with depreciation is that it will be recaptured in due time and hence it only postpones the payment of the US tax liability and not eliminate it (unlike all the other expenses). One can probably argue that at the time of the recapture, foreign tax credits that were carried forward can be utilized, but the presence of the 10 year carry forward rule would not allow this for properties held longer, and these FTCs could never be claimed. In that scenario it would not be reasonable to consider depreciation a "definitely related" expense for 1116, even if one agrees to the point you were making about the source of these expenses (and that they should be based on the US treatment and not foreign).
