>Exclusion of depreciation from Schedule B would not be a good idea at all, as this would lead to a very high >additional tax burden at the time of recapture even though one did not obtain any benefit from depreciation.
Do you mean Schedule E? (Not Schedule B?)
But if the US tax on the rental is zeroed or reduced (because of a higher numerator in the 904 limit calculation) you did indeed get a benefit. The question is how much? I.e. is your extra US tax offset by the higher FTC.
Even though there is more US income upon sale you might also you to get a higher FTC then to offset any foreign-sourced capital gain. But it will be hard to predict.
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