You, a single taxpayer, bought your home in 2000, immediately set up a home office in one room and correctly deducted expenses and depreciation.
Over the years, you claimed $10,000 in depreciation on your tax returns.
This year you sell your home and your profit is $100,000.
Your gain is well under your allowable $250,000 tax-free residential sale exclusion. But of that $100,000, the $10,000 that is allocable to the depreciation claimed on your home office over the years is considered taxable gain.