why a paid-for boat has depreciation listed as an "expense"?
Granted, depreciation would diminish value, but it can only diminish the value of the item.
SO . . . a $20,000 depreciates until it's worth nothing, meaning the expense of the depreciation was $20,000 and the value of the boat is nothing, meaning that the $20,000 orginally spent, is now lost.
BUT it remains ONLY $20,000, not $20,000 PLUS the depreciation amount.
I appreciated the analysis in the OP. I don’t know if I agree with any of it, but I haven’t yet bought my boat. I am still looking, despite being laid off in November, and the college and home expenses mentioned above.
CaptainFredGreenfield - Welcome to Sailnet!
I don't think folks had an issue with the vast majority of it just some of it like the stated depreciation.
What happened to the Pearson 34 did I miss something?? I could have sworn you had a Pearson or were surveying one an buying it..??
How on Earth did your bell housing mounting get cracked as show in your photo... that had to add up to some expense, at least in your DIY time!
www pbase com /mainecruising/image/107573211
__________________
Sailingdog Telstar 28
New England
You know what the first rule of sailing is? ...Love. You can learn all the math in the 'verse, but you take
a boat to the sea you don't love, she'll shake you off just as sure as the turning of the worlds. Love keeps
her going when she oughta fall down, tells you she's hurting 'fore she keens. Makes her a home.
—Cpt. Mal Reynolds, Serenity (edited)
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I'm not an accountant but my understanding is depreciation is only a business expense. If you have no income from the boat, you can't depreciate it, because depreciation is an accounting method to relate expenses to income, or for the purposes of determining taxes on the income.
So, in other words, I think we have an apples and oranges situation here. Since most boat owners are not in the boat business, depreciation doesn't apply?
Check out the Wikipedia article on depreciation, for instance.
Finally, my impression of the foregoing discussion is: you buy a boat, if you own the boat for longer than a few years, even if you upkeep it, it becomes salvage and you sell it as junk. Therefore, it's not worth it!
If so, I don't think that's "depreciation". Without income to relate the declining value to, it's not depreciation. Without a company with assets, expenses, profits, etc., there's no depreciation. Without a bookeeper or auditor to declare and account for the depreciation, there's no depreciation.
Depreciation refers to the fact that the value of all goods decreases as they age. "Depreciating" the value of assets refers to showing that loss on your balance sheets, or on your taxes if the tax code allows you to do that. For instance, a corporation that buys a new masonry and steel building, or a thousand miles of transmission wires and towers, cannot just write off the "cost" of that all at once. They are tradiitonally allowed to "depreciate" the cost over a 40-year period. (In some cases less.)
Now, is a brick building worth zero, forty years after you buy it? Maybe, maybe not. That's the magic of tax codes and accounting.
But I guarantee that if you buy a 250,000 yacht now, in ten years it won't resell for 250,000. It might sell for 125,000, and that means it depreciated by half. When you try to get your money back--you'll only see half of it, and you've lost money to depreciation, regardless of businesses and business expenses and tax magic.
Buy a new car for $25,000, take it home, and your tree falls on it six months later. Your insurance might pay you $22,000 for the total loss, and you say "But it was new!" Wrong, it already depreciated by $3,000 as soon as you took it out of the showroom and it became "used".
Factory defect that got by....
