Thank you, I get the depreciation recapture part. It shows up in Schedule D as a capital gain. There is a supporting worksheet Unrecaptured Section 1250 Gain Worksheet (weird it is called unrecaptured). I googled "Unrecaptured Section 1250 Gain" and just like you said it is 25% at a maximum.
What I'm confused is the number in line 7a of the 1040. It is exact the opposite number of line 6 (the LTD depreciation of the property that was sold). There is a total gain of 220,000 of which 43,000 is taxable (LTD depreciation) and 177,000 is section 121 exclusion. This rental property had 31,000 nondeductible loss (carried forward + current year loss). I think it make sense to be released this year to other income, to offset the 43,000 gain from recapture of depreciation. What's weird to me is that the other income (loss) is exactly -43,000 instead of -31,000. It seems system used $12,000 of carried forward loss from another rental property which is not sold.
Is that intended? I thought only the one sold can release the prior losses in the year it was sold. Where could I screwed up?
Thank you.
@Carl
