Does assisted living real estate qualify for a 1031 exchange?
Direct answer
Yes. Since 2018, only real property qualifies for a 1031 exchange, and assisted living real estate is real property. It qualifies whether you operate the community yourself or lease the building to an operator. The furniture, fixtures, equipment and the operating business do not qualify.
What to know
When you sell an assisted living community, the sale price is divided between the real estate, the furniture and equipment, and the business itself. Only the portion allocated to the real estate can go into a 1031 exchange. The purchase price allocation, reported on IRS Form 8594, sets how much of your gain can be deferred.
A few rules decide whether the exchange works. A qualified intermediary must be in place before your sale closes. You then have 45 days to identify replacement property and 180 days to close, or your tax return due date if that comes earlier and you do not extend. The same taxpayer must sell the old property and buy the new one. Any cash you take out, or debt you do not replace, is taxable boot.
This is general information, not tax, legal or investment advice. Talk to your CPA and attorney about your situation.
How Haven helps
Haven sells assisted living communities for owners who plan to exchange, and helps buyers find qualifying replacement properties through its licensed brokerage, Haven Realty. Read our 1031 exchange guide for senior housing.