I also have fully depreciated improvements/assets.
If you would have taken the correct depreciation, and the asset(s) would still have been fully depreciated, then your cost basis on that asset is still zero. (not including the land, since land is not depreciated.)
Assuming you do not qualify for the capital gains tax exclusion, you can just report the sale in the Sale of Business Property section. There you can use the correct cost basis. When asked for the depreciation amount, You'll enter the "higher" of the depreciation actually taken, or the depreciation you should have taken. While the capital gain realized will be taxed at the capital gains tax rate, the recaptured depreciation will be taxed at the ordinary income tax rate, which can be anywhere from 0% to a maximum of 25%.
