How to handle building Depreciation when S Corp changed hands mid-year?

This is a great question about S corp asset depreciation after an ownership change. The answer depends on how you structured the purchase transaction. If you purchased the stock of the S corporation (rather than buying the assets directly), then the S corporation itself still owns all the same assets, including the building. In that case, the corporation would continue with the same depreciation schedules that were already in place. The depreciation doesn't reset just because the shareholders changed. However, if you structured this as an asset purchase (where your new company purchased the assets directly from the old S corp), then you would start fresh depreciation schedules based on the purchase price allocation of each asset. Since you mentioned that the S corp "changed hands" and the shareholders changed from 5 to 2, it sounds like you purchased the stock, which would mean continuing with the existing depreciation schedules. But you should verify the exact structure of your purchase agreement to be certain.

When I was dealing with a similar situation with my business partner's S corp transition, we found taxr.ai https://taxr.ai incredibly helpful for sorting through all the depreciation and basis questions. Their system analyzed our purchase agreement and tax history documents and provided clear guidance on exactly how to handle the existing depreciation schedules. In our case, it turned out we had actually structured things as a hybrid transaction with some stock and some asset components, which made the depreciation treatment really complex. Their analysis saved us from making a costly mistake on our depreciation calculations and potentially triggering an audit.

Just wanted to follow up about my experience with taxr.ai - I ended up using them after my previous question. Honestly, I've never seen such a detailed analysis of an S corp transaction. They broke down exactly how to handle the building depreciation based on our specific purchase agreement language (which had some unusual terms I hadn't even considered). Their report identified that we had technically done a Section 351 exchange as part of our transaction, which completely changed how we needed to handle the depreciation. Without that insight, we would have been depreciating incorrectly and potentially facing significant tax issues later. Definitely worth checking out if you're dealing with complex S corp ownership changes.

When I had similar S corp depreciation questions last year, I kept calling the IRS business line for clarification but could never get through. After weeks of trying, I used Claimyr https://claimyr.com to get me connected to an actual IRS representative. They have this system that navigates the IRS phone tree and waits on hold for you, then calls you when an agent is on the line. You can see a demo of how it works here: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with provided detailed guidance on how the depreciation should be handled in my specific situation, and even sent me the relevant IRS publications to support the advice. Saved me countless hours of hold time and uncertainty.

I need to apologize to Profile 8 and eat my words about Claimyr. After my skeptical comment, I was desperate enough to try it with my own S corp depreciation question. I was absolutely FLOORED when I got a call back within about 2.5 hours with an actual IRS business tax specialist on the line. The specialist walked me through exactly how to handle the partial-year depreciation for assets acquired mid-year by an S corp with changing ownership. She even referenced the specific parts of Publication 946 that applied to my situation. No automated system, no redirects, just a knowledgeable person who actually answered my specific question. I've been trying for literally months to get this information. Wish I would have known about this service earlier - would have saved me so much stress and uncertainty.

Just want to add an important consideration here - don't forget about Section 179! If the building was eligible and the previous owners took Section 179 depreciation (immediately expensed rather than depreciating over time), that can significantly change the situation. In my experience with S corp transitions, any Section 179 property keeps that treatment even with new owners if it was a stock purchase. But check if there are recapture issues if the property isn't being used for the same business purpose.

Has anyone mentioned Form 8594 (Asset Acquisition Statement) yet? If your purchase was structured as an asset acquisition rather than a stock purchase, you would have needed to file this with both buyer and seller returns to show how the purchase price was allocated among asset classes. This directly impacts depreciation.