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Purchasing a boat under LLC (Florida).

3K views 25 replies 9 participants last post by  Minnewaska 
#1 ·
As the title indicates I'm investigating purchasing a sailboard and using the vessel as an office. I'm a consultant that primarily that maintains contact on on-line and would like to explore the coast a bit while regularly working aboard.

That would mean I also intend to liveaboard the vessel. I'm not sure how this would affect my ability to deduct expenses related to the vessel.

I've read many threads on this site addressing interest and such for a primary residence, and I believe one that indicated it needed a permanent galley and head.

Not sure I can do what I want to do. Buy a vessel, outfit it as an office, and work while in port and sail on off-days.

Does anyone has first hand experience with this issue?

Cheers,

W.
 
#3 ·
In reality, there is no difference in using a boat as an office, or purchasing an office on dry ground. The write-offs are the same. I did this as an outdoor writer, writing for two dozen publications, both weekly and monthlies, for the better part of 30 years. It's not the location or construction of the office that constitutes the write-off capabilities. There are marina offices that sit at the ends of piers that have the same write-offs. Are they any different than a marina office sitting on dry ground? In my case, I generated 100 percent of my writing income from writing stores on boating, fishing, conservation and the outdoors in general. The boat provided me with the ability to go to locations to catch those fish, photograph others in boating and fishing activities, and with the aid of a PC onboard, I was able to send those articles directly to the publisher via email. Every aspect of the boat was a write-off.

In your case, the boat would be similar to any office deduction, even if that office were at your home. You should be able to write off all expenses associated with the maintenance and upkeep of that boat/office on your schedule C.

All the best,

Gary :cool:
 
#4 ·
This needs to be answered by a tax attorney or CPA. Not that I think Gary is wrong, but there are some complexities that I don't have a ready answer for. Like how does takeing the mortgage interest deduction on a boat compare with taking the available write offs available to the boats use as an office, versus buying the boat in an LLC and renting it back to yourself as a tenant effect tax burden. You could structure this a number of ways, and only a real expert Can put real numbers in and give you the best option for your situation.
 
#7 ·
why not do all you can tax-wise for... including setting your vlog/boat as a non-profit...
Well, you don't get to just arbitrarily say that your boat is a non-profit. Your business has to meet a number of very specific criteria in order to qualify as a non-profit. And then there is a whole bunch of paperwork that you have to file and keep up to date, in order to maintain your non-profit status.

If you work from your boat, but the boat itself is not a critical element of your business (as it was for travlineasy) then the rules would be the same as for a home office deduction. That is, you would have to document what portion of the boat, and what portion of the time on the boat, was dedicated to business purposes, and your deductions would be based on that.
 
#10 ·
The snag is that you are living aboard. Therefore, the vessel is not a commercial asset used in the routine activity of a business. It is your home, which also serves as your place of business. Home office deductions were simplified last year, but I believe they still require that a part of your home is used exclusively for your business. It can't be your dining room table, it needs to be a room. Hard argument to make on a boat.

If you lived elsewhere and used your boat for an office or for a marine business, that's entirely deductible. Ironically, if you use the company boat occasionally for personal purposes, you are required to increase the company's taxes due by that usage (ie reduce it's deductions). Very common issue with company owned aircraft. If the CEO uses it to go on vacation, the company can not deduct it. In fact, if the CEO doesn't reimburse the full retail charter value of the flight, the CEO has to pay income tax on the value of the use.

Definitely get a CPA or enrolled agent.
 
#14 ·
Filing for incorporation as a non-profit is little more than filling out the paperwork with your state. Although, that just means the entity exists, nothing more. Getting the IRS to issue a tax exemption (i.e. 501c3) is well more involved, expensive and time consuming. You don't just qualify by definition, the IRS has to review your app and issue an exemption.
 
#16 ·
A public internet forum is not the place to get tax advice. Certainly not if you are hoping to qualify for non-profit status. There are entire books written on this, and no one posting here is going to write a book just for you. Go find out for yourself, or hire a tax advisor if you really, REALLY want to know.

In any case, the fact that practically NONE of these vloggers have setup charitable institutions should be enough to tell you that it is not as easy as you are imagining it.
 
#25 ·
I am not imagining it easy or not, my point was that it would seem to be a way to business as and perhaps deduct expenses. I don't know how many folks have a non-profit or not, I don't know how many have set their vlogging up as a business or not. I would have to guess some have.. for the liability.

You are probably right about 'easy' since what is the jurisdiction of a sailing vlog? Is it the world, the port you sail out of?

The reason they don't (or do) do it, might have more to a general business sense. There are some vloggers who are making $5k a video which might add up to $20,000 a month ($200,000 for 10 months), but I am not sure if you asked the vloggers if what they are doing is a business, that would be their first thought.

But it is... now if they want to get an LLC, not sure where they would apply for that... in many ways I suspect they are doing these vlogs 'under the table' And yes... you could hire a cpa.. to tell you why to base yourself in the Caymans.. if that is a good place to protect your assets .

And I would like to point out.. I was wondering why vloggers don't incorporate (non profit or for profit) and several people have jumped on my posts as if I was asking for free advice... I really was only thinking about those doing it for entertainment purposes... Not doing it myself... just wondering.
 
#19 ·
In reality, you really don't need a tax exempt status when you use the boat purely for business purposes, such as an office on the water. Everything associated with the boat becomes a legal deduction, slip rent, repairs and maintenance, fuel, electricity, water, etc... What more could you want? It's far better than a home office, which only allows you the percentage of the home to be deducted for business purposes. And, if you wish to sleep and live aboard, the rules remain the same. This is the best deal for any small business entity. Keep in mind that office can be in a professional building, shopping center, store front, or marina - it's still just an office. Whether or not it floats has no bearing on anything.

Good luck,

Gary :cool:
 
#20 ·
In reality, you really don't need a tax exempt status when you use the boat purely for business purposes, such as an office on the water.
No, you don't. But the comment that started all the discussion about non-profits was that all these people with sailing blogs and vlogs should declare their boats to be non-profit, so that anyone who donates to them can deduct the donation from their taxes. As I'm sure you already know, as we have all been trying to impress upon the poster who made that comment, it isn't anywhere NEAR that simple!
 
#21 ·
I have a friend who has a non-profit and from what he tells me, it's a nightmare to say the very least. And, he has been audited so many times by the IRS that he pays an attorney a retainer every year just to be on the safe side.

For me, I never wanted to be non-profit - I would love to pay a couple million in taxes one year. WOW! That would be one Hell of a year. ;)

All the best,

Gary :cool:
 
#22 ·
A non-profit is a special exemption from usual tax law. They are, in effect, government subsidized organizations. To get this special status a 501(c )(3) must have one of these purposes: charitable, religious, educational, scientific, literary, testing for public safety, fostering amateur sports competition, or preventing cruelty to children or animals.

You need to have a board and file with the IRS to apply for the status, and once you get it you need to file annual returns.

I'm on the board of a community sailing organization that is a 501(c )(3). Having a mission of "a bunch of us wanna mess around with boats" wouldn't cut it, thus our mission is teaching sailing and sailboat racing. This allows us to mess around on boats tax free :)
 
#23 ·
If I could have run my engineering office out of my sailboat a long time ago and use it for pleasure I would have had my Fontaine Pajot Lucia up and running a long time ago. Not as easy as many think it is unless the entire boat is the office and run as a company asset (like an office building, etc).

If used for personal pleasure you must pay taxes for the use of the vessel as 'income'. There are more restrictions in running a company asset such as a boat, airplane, etc., and must meet the tax code of IRS. This is why you must get a tax attorney to view your business and the qualification for running the business out of the asset (boat, airplane, etc.).

If you do purchase one of these 'luxury' items (boat, airplane, etc.) as a business asset. It is very important that you keep detailed records about how the asset is used and you must carefully separate any personal use as compensation and record it as personal income. IRS rule.

Claiming luxury items for personal use as legitimate business assets will only draw the attention of auditors and cast the IRS auditors eye on your integrity and honesty. If you have legitimate business reasons for purchasing the vessel, by all means do. However, if you are just looking for a tax loophole, this is one that will easily be disallowed by the IRS and mean penalties and taxes upon you.
 
#26 ·
If you really want to get your head spinning, the IRS can deem your business a "hobby" and I dare say many vloggers would appear to be hobbiests. In that case, you pay tax on all the revenues, donations, etc, but can't deduct the expenses, as they are considered incurred for your hobby and you would have bought them anyway. Sure sounds like 99% of vloggers to me.

Finally, let's try to clear up a serious misconception over liability protection afforded by incorporating your business. It's is true that the owners of a corporate entity are not liable for the actions of the corporation. The owners financial risk would be no greater than the value of the ownership itself. If you buy a share of stock in IBM, you can't be sued for what IBM does, but you could lose the value of the stock. I underline corporation for a reason. You are not insulated from liability arising from your own actions. If you are personally the crew of the ship that caused harm, the pilot of the aircraft or the producer of the video, you remain personally liable for your actions. Makes no difference, whatsoever, if you formed an LLC.
 
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