Just re-read the question. Let me try again.
In the year of sale (assuming you sold at a gain)
First, your gain is increased by the recapture of all prior depreciation.
Next, the taxable gain is reduced by your passive carry overs.
If those passive carry over's get your taxable sales gain to zero and you still have losses left over;
The remaining losses are then deducted from "other" ordinary income (such as W-2 income) up to a maximum of $3000. Then if you still have carry over losses left;
They are carried forward to the next year where you can deduct a maximum of $3000 from your other ordinary income. This will continue each year until all of your losses are "used up".
