1031 and solar

Forum|Forum|4 years ago
June 16, 2022
1 reply
5 views

Taxpayer finds new home that otherwise qualifies as replacement property for 1031 purposes, however it is a new build and she can purchase outright/finance new solar panels. Would the solar panels be considered real property as regs basically and indirectly indicated if they are removable without sturctural damage, they aren't considered "real property".

Lacerte Tax

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qbteachmt

Level 15

It's a rental? Buying outright or financing it doesn't change the property or the treatment; that's the Banking, not the tax code. This is an investment property, and you are simply describing that the solar is purchased separately, the same as if there needs to be a property line fence?

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11BusterAuthor

Level 5

Correct...that has to do with selling land rights or something else. No, in this case after research further, under the final regs, to be considered real property must:

Unlikely, solar property would qualify especially if. a SFR

qbteachmt

Level 15

I believe the industry uses the word "integrated." As in:

A 1031 exchange has a ground source heat pump system, so that is integrated into the real property, and not treated as a separate asset. And there can be roofing with solar ability (EV shingles are available) and that is an integrated component of the real property:

https://www.tesla.com/solarroof

Or;

A 1031 exchange with the solar being priced separately, because it was an "add on" or even seen as optional, means it is not part of the real property for this purpose. It would be treated as additional asset.

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