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Houseboats As Real Property
Q:
Subject: Exchange Question
I have a piece of bare land (investment property) that I want to exchange for a floating home. I am being cautioned that this floating home, even if we use it for investment purposes, does not qualify for 1031 exchange because it is considered personal property and therefore not a like-to-like exchange. (This may be similar in principle to exchanging for a mobile home that is in a long-term (30 year) lease.)The best argument we've heard thus far is that in California, there is a law on the books where for tax assessment purposes, floating homes are considered real property. I'm told 1031 respects state law over federal. Further, I understand it is unlawful for a person to have to pay real property tax on personal property, therefore (sort of a "if a=b and b=c then a=c" thing) we feel we would have a good argument should we be audited.Our title company, 1031 exchange agent and real estate agent all are comfortable with the transaction. Are we taking too much of a risk?Thanks for your help!
A:
At first, I thought you were going to say that your exchange facilitator was refusing to accept the houseboat as a suitable like kind replacement property. I agree that a permanently docked houseboat, such as you often see in places like Sausalito, which is taxed by the county as real property, would be appropriate like kind property as long as it will not be used be you personally and will be held for rental, business or investment purposes.
This is a similar situation to mobile homes. RVs and other large living quarters that move around a lot would definitely be considered as personal property; while permanently mounted mobile homes that are taxed by the county as real property would meet that test for 1031 purposes.
A boat that is not permanently moored, even with living facilities, would be considered personal property and not suitable replacement property for the disposal of land.
It sound like you are on the right track.
Good luck.
Kerry Kerstetter
Labels: 1031
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 6/30/2005 10:15:00 PM Send this post:
