What is inside an adult day care cost segregation report
The full structure of the deliverable, section by section, with the numbers from one illustrative sample study on a 7,000 SF adult day health centre. Every figure on this page is transcribed from that report, so you can hold your own study against it.
What this is. An illustrative sample report on a representative adult day health centre, watermarked ILLUSTRATIVE SAMPLE on every one of its 84 pages. There is no client in it and no real address. The interior images in it are AI-generated representative images, and the report says so on the page they appear on: they are not photographs of the subject property and nothing in the schedule is evidenced by them. On a live engagement your own photographs are incorporated per IRS Pub 5653 Chapter 4. There is no photography of a real centre. It is not a customer's study, redacted or otherwise, and we do not publish one without that customer's named approval. What is real is the method, the section structure, the authorities cited and the schedules: those are what a paying engagement receives.
The property the sample is built on
The most common real form of this type: a professional office building converted to a day health programme, rather than a purpose-built facility. Note the occupancy line — it is not a detail, it is the classification the entire study rests on.
What the sample allocated, class by class
This is Section 3 of the report. The four class amounts add to the depreciable basis exactly, which is the check to run on any study: if the classes do not reconcile to basis, something has been double counted or dropped.
| MACRS class | Allocated basis | % of basis |
|---|---|---|
| 5-year personal property Rev. Proc. 87-56 Cl. 57.0, data cabling Cl. 00.12 Nurse station and medication room casework with locked med storage, hand-wash casework and the charting counter; nurse call, participant monitoring and wander-management; commercial kitchen equipment, casework and the dedicated plumbing, gas and hood exhaust serving it; assisted bathing and spa tub equipment with its dedicated supply and water-tempering connections; dining and activity room carpet and removable resilient flooring; the dining serving-line casework with its warming and refrigeration connections; therapy and activity room equipment mounts, mirrors and dedicated circuits; salon and barber station casework and its dedicated plumbing; secure entry vestibule access control; cameras and remote family-viewing monitoring; low-voltage data, telephone and paging cabling; laundry dedicated plumbing, venting and electrical; removable wall protection; decorative and accent lighting | $161,274 | 13.6% |
| 7-year personal property Rev. Proc. 87-56 Cl. 00.11 Dining and activity room furniture, classroom and activity room furniture, office and reception furniture | $31,344 | 2.6% |
| 15-year land improvements Rev. Proc. 87-56 Cl. 00.3 Accessible parking and striping, the transport van loading zone and drop-off paving with its bollards and striping, the secure outdoor courtyard walking path, garden beds and wander-secure fencing, site lighting, landscaping and irrigation, sidewalks and exterior paving, exterior monument signage | $86,638 | 7.3% |
| 39-year real property IRC §1250 structural components Shell, roof and foundation, interior partitions, comfort HVAC, general electrical and general plumbing, the bathing room itself with its floor drain, restrooms, fire sprinklers and the fire alarm, general lighting, and the drop-off canopy structure as distinct from the paving under it | $910,744 | 76.5% |
| Total depreciable basis | $1,190,000 | 100% |
| Accelerated property, 5-, 7- and 15-year | $279,256 | 23.5% |
Read this as one result, not as a range. This centre reclassified 23.5% of basis, which sits inside the 14–26% of basis we model for the type, and says nothing about where any other centre lands. What carries this one is clinical fit-out rather than site work: the nurse station and medication room, the nurse-call and wander-management system, the assisted bathing equipment, the serving line and the salon station are all present here, and the 15-year bucket is a modest 7.3% because a converted office sits on a parking lot rather than on grounds. A centre with no bathing room and no salon lands lower; one with a large secure courtyard lands higher on the site side. Age, finish level, declared equipment and the land share all move the answer, which is why we model the actual property before quoting anything.
Why an adult day centre reclassifies more than the office it used to be
Because a day health programme puts clinical equipment into a building that was never built for it, and almost all of that equipment is personal property serving the care programme rather than the building. Adult day services fall in asset class 57.0, distributive trades and services, under Rev. Proc. 87-56, so qualifying personal property in the building is 5-year.
Moves off the 39-year schedule
- Nurse station: casework, locked medication storage, hand-wash casework and the charting counter
- Monitoring: nurse call, participant monitoring and wander-management — call stations, door alarms, locators
- Bathing: the lift, the tub and the water-tempering serving them
- Dining: serving-line casework with its warming and refrigeration connections, plus the commercial kitchen equipment and its dedicated plumbing, gas and hood exhaust
- Therapy and activity: equipment mounts, mirrors, dedicated circuits
- Salon: station casework and its dedicated plumbing, where one is present
- Also: dining and activity room carpet, secure entry access control, cameras, low-voltage cabling (asset class 00.12), laundry connections, removable wall protection, decorative and accent lighting
- 7-year: dining, activity, classroom, office and reception furniture
- 15-year: accessible parking, the transport van loading zone and drop-off paving with bollards and striping, the secure courtyard walking path, garden beds and wander-secure fencing, site lighting, landscaping, sidewalks, the monument sign
Stays 39-year
- Structural shell, foundation and roof
- Interior partitions
- Comfort HVAC, general electrical and general plumbing
- The bathing room itself, with its floor drain — the equipment in it is 5-year, the room is building
- Restrooms, fire sprinklers and the fire alarm: life safety is part of the building
- General lighting
- The drop-off canopy structure, as distinct from the paving under it, which is a 15-year land improvement
Over three quarters of this sample's basis stayed here, which is the ordinary outcome for a converted office and the reason the accelerated figure is roughly a quarter rather than a half.
If you lease the building to an operator, this is your study, not theirs. The landlord depreciates the building, the site work and whatever conveyed with the purchase. The operator depreciates its own equipment and any build-out the operator paid for, which is a leasehold improvement study on the operator's return. If you own both, you get both, and the intake asks what was included in the purchase so nothing is counted twice.
The 84 pages, section by section
Fourteen numbered sections and seven appendices. The page ranges below are this sample's; length scales with the building and with how much documentation an engagement carries.
Executive summary
The headline result, the class-by-class allocation, and the two subsections a CPA reads first: 1.1 Year 1 Tax Impact Analysis and 1.2 Allocation Bridge. This is where the $279,256 of accelerated property and the estimated $291,905 of total first-year depreciation are stated and sourced.
Property summary
The subject property as the study saw it: area, year built, acquisition and placed-in-service dates, the room programme, the land allocation and its source, and the inputs each figure rests on. It also states the classification the whole study turns on: nonresidential real property under IRC §168(e)(2)(B).
Cost allocation summary
The allocation by class and by category, with every principal accelerated component named and priced, and the statement that the component allocations reconcile exactly to the depreciable basis.
Detailed component breakdown
Every identified component with its class life, allocated amount, authority and evidence basis. Includes 4.1 Facilities Summary by CSI Division, 4.2 Indirect Cost Allocation and 4.3 Reconciliation of Costs.
Engineering rationale by category
Why each category was classified as it was, written per category rather than per line, so the reasoning can be followed without reading the full schedule.
MACRS depreciation schedules
Year-by-year deduction tables for each class, with the bonus treatment applied in the placed-in-service year, formatted to carry onto Form 4562.
NPV analysis (illustrative only)
The time value of moving the deductions forward, labeled illustrative because it depends on a discount rate and a tax rate the taxpayer supplies.
Depreciation recapture considerations
What reclassification means on a later sale, including the §1245 treatment of the personal property the study identifies.
Sensitivity considerations
How the result moves when the inputs move, which is the section that answers whether a different centre would land somewhere else.
Methodology and basis of analysis
The engineering-method cost approach, the data sources used, and the IRS Pub 5653 interview and documentation expectations the study is written against.
Legal authority for asset classification
The statutory and administrative authority behind each classification position taken in the schedule.
Schedule for fixed asset ledger entry
The result restated in the form a fixed asset ledger wants it, so the classifications can be booked without retyping the schedule.
Tax practitioner review considerations
The decisions the report deliberately leaves to the CPA, including the filing method: original return, amended or superseding return, or a Form 3115 method change.
Conclusion
The result restated with its limitations, and what would change it.
Appendices
A, cost derivation summary. A-1, the multiplier ledger, which shows every adjustment applied to a modeled unit cost and why. B, IRS ATG quality elements mapped to where the report addresses each one. C, Rev. Proc. 87-56 and the IRC framework. D, case law and IRS rulings. E, audit documentation and support. F, exhibits and supporting documentation.
What this sample does not contain, and why
There is no §481(a) lookback workpaper in it. The subject property was acquired and placed in service in 2025, so there is no prior-year depreciation to catch up, and the report states plainly that it does not calculate a §481(a) adjustment. A study on a building held for years does add that computation and the Form 3115 reference workpaper, because that is the whole point of a lookback; your CPA prepares and files the Form 3115 itself. Section 13 sets out that filing-method decision. We would rather tell you what is absent than describe a section you would not receive.
What an examiner would look for
The IRS Cost Segregation Audit Techniques Guide, Pub 5653, sets out the principal elements an examiner reviews when a study is challenged. The sample maps to them section by section, and Appendix B does that mapping explicitly rather than leaving it to the reader:
- Engineering analysis, Sections 5 and 10, the rationale by category and the method it rests on
- Component-level documentation, Section 4, every component with its class life, allocated amount, authority and evidence basis
- Cost derivation, Section 4.2 and Appendices A and A-1, indirect cost allocation, the derivation of the unit costs from industry-standard construction cost data, and the ledger of every adjustment applied to them
- Asset-class mapping, Sections 3 and 11, each position tied to its Rev. Proc. 87-56 class with the authority stated on the line
- Reconciliation, Section 4.3, the check that the allocated components add back to the depreciable basis
- Audit documentation and support, Appendices B, D, E and F
Audit support ships with the report and does not expire: the workpaper exhibits, the classification rationale per component, internal technical review, and written answers to your CPA's questions about our methodology. Full scope at /audit-defense/.
Report questions
Is this a real customer's adult day centre study?
Is an adult day centre depreciated like assisted living?
Why did this sample reclassify 23.5% when the adult day care page says 14–26% of basis?
What stays on the 39-year schedule?
The sample has an "illustrative invoice assumption" line. What is that?
How long is the report, and what does a study cost?
See your centre's numbers, not a sample's.
An adult day care study is self-serve: the address, the purchase price and the square footage are enough to start, and the intake asks whether there is a nurse station, a bathing room or a salon. If you converted the building, the conversion invoices replace modeled costs with documented ones.
Adult day care cost segregation · Senior living, if people sleep there · All report examples · Form 3115 walkthrough