Investors & landlords

I did the following, but the remaining cost did not get counted towards a loss. It only gave a $40 as depreciation for the year.  Did I miss something?

 

"However, if you select NO you will be asked for sales information. Give it a sales price of $0 and it will be treated as sold at a loss. Any remaining depreciation to be taken will then be deducted from the rental income"

 

I am hearing two different ideas here 1) the depreciation stops when the furnace breaks (I assume it means the remaining cost does not get taken off) ; and 2) the remaining cost does get taken off as a loss (but I didn't get the software to take it that way).  Am I hearing it right? which one is correct?