actually, you have a $110K gain on sale the $390k cost must be reduced by the $100K of depreciation. of the $110k gain, $100k is taxed as depreciation recapture, and $10K is taxed as a long-term capital gain. the complete taxable disposal allows you to deduct the PAL carryforward. so in the end you are correct. you'll have $30k to offset other income. depending on your tax bracket in the year of sale the depreciation deduction might be of benefit. say you're in the 35% bracket. that $140K in PAL will first reduce the taxable income in that bracket and then the next lower and so on. tax on depreciation recapture - section 1250 - is a maximum of 25%.
