Fair enough on rehashing.
Re: depreciation and FTC. See my prior comment and this elaboration. When the depreciation is recaptured (upon sale of the foreign property) it seems to me that will usually give you higher US foreign source income. The 904 limitation numerator will be higher. It is lower now because of the depreciation deduction but higher then, and more foreign capital gains tax will be eligible for a possible FTC. And maybe some carryfowards if they haven't expired (and the 904 limitation and any differential capital gains adjustments don't lower the 904 fraction).
Let's use an example. Just round numbers. Say $100k starting basis on the overseas rental property. $10k of rental income, $4k of depreciation. No other rental deductions in either country. Sell the property in a few years for $150k with accumulated depreciation of $16k. No rental income in final year (to simplify).
Current 904 limitation would be ($10k - $4k - share of general US deductions) / <worldwide US income>
Year of sale,
US gain is $150k - $100k - $16k = $34k (with $16k taxed at ordinary rates, max 25%). That is not foreign income. It is US income "from without the US" (foreign sourced income).
Foreign gain (using foreign rules) is $150k - $100k = $50k
Assuming there is a foreign capital gain tax, the 901 US income from foreign sources would be the US Gain figure which would be higher than the foreign rule calculation by the $16k accumulated deduction. This would result in a larger numerator in the 904 limitation calculation and would allow more the foreign tax in year of sale (and any carryforwards) to be used. However, because of low US capital gains rates, the US gain might need to be adjusted downward if any of the US tax on that gain were taxed below ordinary income rates.
Whether this increased FTC in the year of sale materializes or matters depends upon many things, including any LTGC rate adjustment, one's worldwide income at that time (the denominator in the limit), currency changes, etc. This might help but could hurt you.
At worst the tax on the $16k is deferred for a long time, which is a significant value.
I'm not sure I followed your prior answer to the possibility of not claiming the US depreciation deduction now. That would raise US tax, but it should also increase current FTC. If it is a wash (or in your favor), that could work. You would still have to recapture the "allowable" depreciation in the future, but you would have to do that anyway. [In the past I have researched the issue of whether you must take an allowable deduction. There appears to be no authority saying that you must take a deduction (unless the statute says so on only a couple do) and some saying that they are permissible rather than required. See https://digitalcommons.law.villanova.edu/wps/art58/ ]
I'm not sure that's helpful, but I tried.
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