You will pay ordinary income tax rates on the depreciation recapture and you will be allowed to take capital gain treatment on the gain not from depreciation recapture if there is any.

Reason being that as long as net profits are less than $50,000, the tax rate is 15% which can be much lower than your ordinary rate in which S-Corp, LLC, and partnership income are all subject to. 

Much of this is not out of the ordinary given the circumstances but figured I'd share a data point.I'll continue to update the community on the status of this. 

Technically, what you are trying to do converts investment income into ordinary income as it passes from your investment company (or you personally) to your business.  

The loss is classified as an ordinary loss and is 100% deductible against my earned income.  

The depreciation that you took in excess of what was allowed on a 27.5 year schedule will be added to your ordinary income and taxed as ordinary income.  

I found it pretty simple, though 3/4 the way through the only thing I've found that I didn't know was that when you sell a property at a loss, it CAN be an "ordinary loss" vs.

If a property is held for one year or less, then sold for a gain, the short-term capital gain will be taxed at ordinary income tax rates.

The basic premise, upheld by courts around the nation, is that the tenant is responsible for damages above and beyond ordinary wear-and-tear.

@George LeemanI don’t think rental Income would not be long term capital gains but short term or ordinary income.