Published by AE Tax Advisors Team • 2025-07-08

Senior Living Facility Captures $380,000 in Accelerated Depreciation

The Client

Brookfield Senior Care LLC, owned by partners David Chen and Rebecca Wallace, purchased a 62-bed assisted living facility in Raleigh, North Carolina for $5.2 million. The facility generated $1.8 million in annual revenue with net income of $410,000 after operating expenses.

The Problem

The facility was being depreciated over 39 years at $106,000 per year. With $410,000 in net income, the partners were paying $118,000 combined in federal taxes. The building contained extensive specialized systems for senior care -- nurse call systems, commercial kitchen equipment, medical gas piping, ADA-compliant buildout -- none of which had been segregated.

Our Strategy

Senior living facilities are among the most component-rich commercial properties. Our study reclassified $480,000 into 5-year property (nurse call systems, medical gas piping, specialized electrical, individual room cabinetry and fixtures across 62 rooms), $215,000 into 7-year property (dining furniture, common area furnishings, commercial kitchen infrastructure), and $420,000 into 15-year land improvements (accessible walkways, parking, landscaping, emergency vehicle access). Total accelerated: $1.115 million.

The Results

The $1.115 million in accelerated depreciation eliminated the partners' tax liability and created substantial carryforward losses. Combined Year 1 savings reached $380,000, which the partners reinvested into facility upgrades including a new memory care wing.

Key Takeaway

Senior living and assisted living facilities contain an unusually high density of specialized, short-lived components. The per-room buildout multiplied across dozens of units creates significant cost segregation value.