For you accountants out there

[ylwjacket]

The idea has come up my company to have the company buy a corporate yacht. It would be used, at times, for entertaining clients, and at other times for personal use by the partners in the company.

The idea wasn't so much to have it as a write off, it was more of a thing where a couple of my partners have been talking about getting boats, and the idea came up of pooling resources, and sharing a larger boat than any of them (notice I didn't say me - I'd get the largest my wife allows) would otherwise.

We do entertain clients occasionally on my boat now. I don't get paid by the company, but the consumables, like gas and food, are expensed. If the boat was one with more communal access, it would probably get used more for that sort of thing.

So, we wouldn't necessarily try to write off the payments, insurance, etc, but gas, bait, drinks, or whatever would be an entertainment cost, like buying a client dinner.

And, on occasion, those of us who wished could probably check it out for a weekend cruise with the family or friends.

The thing that I wasn't sure of is, if the company owned a boat (I call it boat, I guess some people would call it yacht), and we did not try to write off the stuff we're not supposed to, would it still trigger an audit?

If the company owned it, then we could make everyone sign a contract prior to them using it, such as attending a USCG course, no drinking and driving, no smoking, etc, etc. It make it easier to manage than a 'partnership' of owners.

Some of my partners like the idea, but my accountant says it's a one-way ticket to an audit, and somehow we would get screwed. I think the partners would not even be adverse to having their personal use pro-rata'ed (cool word huh) to their income at the end of the year. Paying taxes on a fifth of a boat is still a lot cheaper than owning one directly.

What do you gurus out there think?

[Quicksilver]

Not a Guru but if your accountant says "it's a one-way ticket to an audit, and somehow we would get screwed" then I think I would be asking him to clarify what part of the tax code would generate an audit. Besides Who's afraid of an Audit if everything is legal and is acceptable under the tax code. Seem to me he needs to be telling you how you can take advantage of the opportunity if there is one rather than discourage it. Just make sure all your ducks are in a row and it will be financial viable. But thats just my 2cents.

[fln8tive]

Are we talking a boat with crew requirements or like a 42' SeaRay? What about having the company buy a share in a vessel that is already under charter? Fraser Yachts is a very good place to start asking questions http://www.fraseryachts.com/ or your company could buy into a fractional ownership http://www.yachtshare.com/

[ylwjacket]

Barry - you're thinking what I'm thinking. Make it work.

Acella - yeah, like a 42-48 foot Sea Ray, or similar. In a way, with 5 partners, we were sort of considering it ot be a fractional. Maybe incorporate a new company, own it there, and charge us each $100 bareboat charter fee to use it.

[Quicksilver]

Or at least show me some code as to why it wont work. Then I know your covering my behind and not yours when the audit comes. The Tax code has all kind of things we can do, Deductions we can take. The accountant needs to have his game together so if there is a flag raised he can handle the details with the IRS just as he should. He should not be afraid to investigate all the avenues there are to get every deduction you are entitled to and the deductions you don't even know about.

Originally Posted by ylwjacket

Barry - you're thinking what I'm thinking. Make it work.

[Eric5273]

I would write off the payments too if I were you. The chances of getting audited today are far less than even 5 years ago. There have been huge budget cuts to the IRS in recent years, and the number of audits they are doing is far less. And if you entertain clients on the yacht, then you are entitled to at least write off part of it. Technically, it could even be used for corporate meetings among the partners. The question becomes "can the IRS proove you did not use the yacht for that purpose" to which the answer would be "no".

[AutoXer]

I think you need to change accountants. Some tend to be way too conservative. Surely he can get very creative with stuff like this, document the usage and go for it. Don't be scare of an audit, you just need proof and documentation that this yacht was used for business, not too hard to do.

Just remember that the IRS cannot tell you how to run your business! If they had their way, they would rather that I drive around in a Hyundai instead of writing my BMW's off.

[fln8tive]

Originally Posted by ylwjacket

Barry - you're thinking what I'm thinking. Make it work.

Acella - yeah, like a 42-48 foot Sea Ray, or similar. In a way, with 5 partners, we were sort of considering it ot be a fractional. Maybe incorporate a new company, own it there, and charge us each $100 bareboat charter fee to use it.

I'm guessing a seperate LLC is in order...but I would also consult a CPA with maritime clients. My guess is that you have to make the vessel available to outside charter to constitute a bona fide expensable. I have generally found that the most cost efficient marine conveyance is via OPB.


Other People's Boats

[ylwjacket]

Originally Posted by accella4.4

I have generally found that the most cost efficient marine conveyance is via OPB.


Other People's Boats

Without question. OPB is the most cost efficient way to go.

I have owned some nice boats over the years, and now some of my partners are becoming interested in getting boats. With kids and such, it doesn't make much since for us to own a million dollars aggregate in 4 or 5 boats, each of which get used once a month. We could could instead own one boat, through the company, worth a a quarter of the aggregate, and it would get plenty of use.

Plus, I don't want to let them all borrow mine. And, since I'm the most boat-knowledgable of the group, I'd probably use it the most.

I'm sure there's a way to do it. I may have to talk to our second accountant about it.

[Phester]

There are a few ways to do this - completely legally.

Your intentions are not to evade taxes and there are ways to report and account for the transaction that are completely within the code.

A knowledgeable CPA should be able to advise you on the steps that should be taken to properly report the transaction.