Which assets in a senior housing sale are eligible for a 1031 exchange?
Direct answer
Only the real property is eligible: the land and the buildings. The furniture, fixtures and equipment, and the operating business including goodwill, are not eligible. Gain allocated to those assets is taxable in the year of sale.
What to know
A senior housing sale bundles several asset types into one price. The real estate can be exchanged. The beds, furnishings, kitchen equipment and vehicles cannot, and depreciation you claimed on them is recaptured as ordinary income. The value attributed to the business itself, often called goodwill, is also outside the exchange.
How much of your gain you can defer therefore depends on the allocation. Buyer and seller agree on a purchase price allocation in the purchase agreement, and both report it on IRS Form 8594. Negotiating that allocation is part of the deal, not an afterthought, because it directly sets the tax result for both sides.
This is general information, not tax, legal or investment advice. Talk to your CPA and attorney about your situation.
How Haven helps
Haven's brokers work through allocation questions with sellers and their CPAs before a community goes to market, so there are no surprises at closing. Read our 1031 exchange guide for senior housing.