What's the difference if you inherit a building or buy it new?

[MelO4]

The only thing I can find is:  "Assets that are first placed into service by you are often eligible for special depreciation rules that allow you to deduct more of the cost of the asset in the first year it's in use.  You can still depreciate the entire cost of assets purchased used, but you won't get to deduct as much of the cost up front and most of the tax benefit will be received in later years."

I think this is talking about machines and objects not buildings.  

[DavidS127 · Accepted solution]

Yes, you are correct that the option to use "special" or "bonus" depreciation in the first year does not apply to buildings.

For an inherited asset, including a building, your basis is the Fair Market Value (FMV) on the date of death of the person from whom you inherited the building.

[Carl]

It all has to do with it's value, and this matters when the property is used in a business.

When you purchase a building, your cost basis is what you paid for it.

When someone gifts you a building, they also gift you their original cost basis (what "they" paid for it.)  That cost basis is further reduced by any depreciation the gift giver may have already taken.

When you inherit the building, that means the original owner passed away. In that case, your cost basis is the fair market value (FMV) of the building on the day they passed away (not the day it was titled to you.) Furthermore, any prior depreciation taken on the building by the prior owner just "disappears", goes away and evaporates into la-la land to never been seen or dealt with ever, by the beneficiary recipient of the building.

[MelO4]

Thank you to David and Carl.  This has brought me much clarity.  Thanks again!