On March 2, 2003, about 1100 central standard time, a Mooney M20M, N101PB, registered to Makaira Aircraft Sales LLC, experienced an in-flight fire shortly after takeoff from the Destin-Ft Walton Beach Airport, Destin, Florida. Visual meteorological conditions prevailed at the time and an instrument flight rules (IFR) flight plan was filed for the 14 CFR Part 91 personal flight. The airplane was substantially damaged by the fire and the commercial-rated pilot, the sole occupant, sustained serious injuries due to burns. The flight originated about 1057, from the Destin-Ft Walton Beach Airport. The pilot stated that he performed a normal preflight of the airplane using the airplane's checklist; the only discrepancy he found was related to the cabin entry door seal. He did add 1 quart of oil to the engine. The flight departed from runway 32 and while climbing between 2,500 and 2,800 feet, the cockpit was enveloped suddenly in thick black smoke. Additionally, he observed flames underneath the instrument panel behind the rudder pedals on both sides of the cockpit. He turned off the master switch and initiated a descending left turn with the intention of ditching the airplane. He reduced the mixture control and opened the cabin entry door in anticipation of ditching but he was able to see outside and elected to return to the airport for landing. He momentarily turned on the master switch and lowered the landing gear; he landed on runway 14. After touchdown, the airplane exited the north side of the runway onto grass where he evacuated the airplane by the cabin entry door. A fire department was not located at the airport. A nearby fire department was alerted at 1101:34, arrived at 1107:09, and extinguished the fire. Examination of the airplane by an FAA Airworthiness inspector-in-charge (FAA-IIC) revealed fire consumed the upper and side fuselage skin of the cockpit and cabin area, and damaged the inboard portion of the right wing including consumption of the area of the right fuel tank. The tailpipe assembly (tailpipe) was found separated from the turbocharger exhaust turbine housing (turbocharger); the coupling used to secure the tailpipe to the turbocharger was found resting on the tailpipe but not in the normally installed position. No safety wire was observed in the coupling; the nut was not recovered. There was no mention of damage to either of the flanges of the tailpipe or of the turbocharger. Additionally, examination of other components of the exhaust system by the FAA-IIC revealed evidence of deterioration that should have been detected during the previous inspection 1.8 hours earlier. Burn damage was noted to plastic tubing in the cockpit forward of the rudder pedals; the tubing was associated with the brake system. Examination of the firewall and cockpit by the NTSB revealed no evidence of burn through or compromise of the firewall. Visual examination of the recovered coupling by the NTSB revealed no damage to the threads. The coupling was determined to be manufactured by Aeroquip as part number (55677-340M), which is specified in the Illustrated Parts Catalog. Review of the Aircraft Log revealed an entry dated November 12, 1990, which indicates replacement of the coupling in accordance with Mooney Special Letter 90-6, dated November 1, 1990. Review of the maintenance records revealed the engine was overhauled on February 22, 1996, and installed in the airplane on May 8, 1996; the entry does not indicate whether a new coupling was installed to connect the tailpipe to the turbocharger. An entry dated March 14, 2001, indicates the exhaust stack was repaired; the entry does not specify what exhaust stack was repaired. An entry dated April 25, 2001, indicates the engine was removed from the airplane for repair. The next entry dated April 20, 2001, indicates the engine was repaired and the wastegate, controllers, and turbo were repaired by Main Turbo Systems, Inc. The entry does not specify if a new coupling was installed to connect the tailpipe to the turbocharger. No other entries related to the exhaust system were noted between that entry and the last annual inspection which occurred on February 13, 2003; the inspection was accomplished using the Mooney Service Guide. The airplane had accumulated approximately 1.8 hours since the inspection at the time of the accident. The mechanic who performed the last annual/100-Hour inspection reported to the FAA-IIC that during the inspection, he removed the turbocharger wastegate for cleaning and also removed the tailpipe. He reported reinstalling the tailpipe using the same nut. Review of the Mooney Aircraft Corporation Service and Maintenance Manual pertaining to the 100-Hour or Annual inspection revealed the exhaust system components are inspected for security. When the airplane was certificated, there was no requirement to protect components aft of the firewall from radiant heat. The airplane minus the retained components was released to insurance adjuster Phil Powell, of Leading Edge Investigations, on November 9, 2003. The retained components were also released to Phil Powell on November 19, 2003.