1031 and solar

[11Buster]

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".

[qbteachmt]

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?

[11Buster]

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]

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.

[11Buster]

Not sure I would agree that either an "option" and/or separately stated price for the solar would matter.  The ultimate answer is the character of the (solar) property itself.  If offered as an option, whether separately charged OR included in total price of the home shouldn't matter (in my opinion).

[qbteachmt]

"If offered as an option"

Yes, we are stating the same concept.

Optionally and not integral to the building = not part of the real property.

Part of the building = pretty much removes the "option" part of any conditional phrase.

", whether separately charged OR included in total price of the home shouldn't matter (in my opinion)."

Well, that's clearly not true. If the sales price includes removable parts, an RV parked in back, an above-ground pool, etc, then that is not part of the real property. I thought that was the crux of your issue?

Paid for in full or financed, has nothing to do with it.

Price inclusive for things that do not qualify as Like Kind, has everything to do with it.

[11Buster]

Correct that is why one needs to look at as to what is being purchased, hence one must look at the components as you mention ".....removable parts, an RV parked in back, an above-ground pool, etc".  Accordingly, solar panels (no solar roof) would not be real property.  Thank-you!