“Like-Kind” Property defined by the IRS under IRC Section 1031 is any form or class of Real Property (Real Estate) located in the United States which is held for the purpose of investment or for business use and not for personal use or as a primary residence. Questions arise whether selling or buying a manufactured home is allowable for a 1031exchange and if manufactured homes qualify as Like-Kind Real Property?
Manufactured homes can only be classified as real property if the structure is permanently affixed to land that the homeowner owns. However it is important to know that while some manufactured homes can be classified as Real Property, some are also classified as Personal Property. Let’s take a look at the differences between these two classifications.
Real Property (Exchangeable) – A manufactured home classified as real property is tangible and permanently attached to land, just like a conventional site-built home. Real Property typically has an APN number which is a number assigned to parcels of Real Property by the county tax accessor for purposes of identification and record keeping. Real property can be depreciated if held for investment or business purposes. If the homeowner receives an annual property tax bill from the county, this would confirm the home is Real Estate (Real Property) and is acceptable for the exchange.
Personal Property (Non-Exchangeable) – A manufactured home or (mobile home) considered personal property is often installed on a temporary foundation where the land is leased, meaning the home could be moved to another location if the homeowner decides to do so. This type of classification is identical to that of a vehicle where the owner receives an annual registration renewal from the DMV. Mobile Homes are considered personal property and are not real estate therefore they do not qualify for tax deferral treatment under IRC Section 1031.
Thinking of taking further steps in finding out if your home is indeed Real or Personal Property? Try contacting a Title Insurance company as they can typically confirm which classification your property falls under.