Your carryover losses are applied, in full, in the year you sell the property. After being calculated on Schedule E, you get to report that amount on Schedule 1, Line 17. This flows to your 1040, Line 6 as a reduction of your income.
But, when reporting the sale on Form 4797, you have to add the depreciation taken over the years to the sales price. So, the gain you thought to be $130K is increased by the amount of depreciation taken.
This add-back of the depreciation is what causes the tax to be around $20k.
