Thank you for your response, and yes I have clicked the Lacerte equivalent of the "fully taxable transaction" 

As for the researched, I can't find anything on point as to if excess vacation property depreciation is considered allowable or not for purpose of the Form 4797.  If does seem fair that it should be if you can't actually deduct it... then again life isn't fair.

On the Schedule E input screen, Lacerte keeps tabs of the excess vacation depreciation as a "carryover".   This is what makes me believe that their is some benefit in the year of sale either on current year Schedule E or Form 4797. 

I rarely have to deal with vacation homes.  I am hoping there is some out their that does on regular basis, and can enlighten me.