Real Estate Depreciation: How to handle it?

So, I’ve been chewing on this tax question for a bit... If a corporation holds some long-term real estate and has spent the last 20 years slashing its taxable income by applying a 5% annual depreciation rate—meaning the property is now fully depreciated—can anyone tell me how the tax base behaves in the very first year after that depreciation hits zero?
For instance:

- Let's say the building was worth $1 million, which means we were claiming $50,000 in depreciation every single year.
- Now, if the company's pre-tax profit—looking at all expenses *except* for that depreciation—was also sitting right at $50,000, that would mean the actual taxable income every year was just $0.00.
- What happens in the specific year when you can't claim any more depreciation, but every other variable stays exactly the same? In this scenario, does the taxable income suddenly jump up to $50,000?

Yeah, totally.

a) If one company sells that depreciated property to another firm at its full market value, can the new owner start chipping away at their tax base using that 5% annual depreciation rate?
b) And what if we’re talking about an acquisition—if a whole company gets bought out by another corporation, can the parent company then claim that long-term asset (the property that used to belong to the first firm) to lower their taxable income at that same 5% yearly rate?

Bryan Gray91 said:a) If one company sells that depreciated property to another firm at its full market value, can the new owner start chipping away at their tax base using that 5% annual depreciation rate?
b) And what if we’re talking about an acquisition—if a whole company gets bought out by another corporation, can the parent company then claim that long-term asset (the property that used to belong to the first firm) to lower their taxable income at that same 5% yearly rate?

a) Yeah, they can.
b) Nope, not on that one.