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Functional assessment methods are an important element in multidimensional neuropsychological evaluations, particularly in older adults. The Adults and Older Adults Functional Assessment Inventory is a new measure of basic and instrumental activities of daily living. Rasch model analyses were used to analyze the psychometric characteristics of the instrument in a sample of 803 participants. The original categories did not provide an optimal assessment of functional incapacity. The scale was dichotomized to achieve a better reliability score and item fit. The final 50 items revealed a moderately high variability in item difficulty, acceptable fits to items and persons, and a good Person Separation Reliability score. The scores were able to discriminate between normal controls and clinical patients. None of the items showed Differential Item Functioning associated with age, gender, or education. The instrument is able to achieve measures of functional incapacity with the useful properties of the Rasch model. [ABSTRACT FROM AUTHOR]