Depreciation is not added to your cost basis when you sell. It's *subtracted* from your cost basis when you sell.
So regardless of your carry over expenses, all depreciation taken *is* accounted for in the year you sell.
So if you have a cost basis of $550,000 with $100,000 of depreciation in the year you sell, your "adjusted" cost basis is $450,000. If you sell for $450,000 you don't have a gain or a loss. Any other carry over expenses are then deducted from "other" ordinary income at a maximum of $3000 a year until they are all used up.
Now don't confuse that $3K/year limit with the $25K allowed each year (including the year you sell) ***IF*** you were an active participant in the rental activity.
