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BOAT OFFICE


Max W

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Client purchased a 62 foot boat this year to be used exclusively for his office (Sch C).  Office and file storage occupy about 35% of boat.

The way I am treating it as follows - 35% deprecialbe; 65 %non-depreciable just like if it were land.

Any comments. Thanks.

 

 

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I see what you mean.  This may be considered a second home and it would be OK to claim  a home office deduction if he meets the criteria.   You say exclusively as an office, what is his occupation?  Boat seller?  Lobbyist?   Drug dealer?  Caviar tastings and transporter?  So many questions.

 

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2 hours ago, OldJack said:

Well, I really question the 65% personal.  Is it his home?  Does he have a home otherwise?  Does he have another office?  Why is the boat not 100% business?  What does the taxpayer/owner say about its purpose and use?

Answer - It is not his home; he does have a rented apartment; it is his only office; and IT IS 100% business.  My question is - is the entire boat depreciable, or only the area used for business?  

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2 hours ago, FDNY said:

I see what you mean.  This may be considered a second home and it would be OK to claim  a home office deduction if he meets the criteria.   You say exclusively as an office, what is his occupation?  Boat seller?  Lobbyist?   Drug dealer?  Caviar tastings and transporter?  So many questions.

 

FDNY - it is not a 2nd home.  It is strictly used regularly and exclusively for business which is putting together financial deals for which he receives a hefty commission.  

Your point about being a second home is well taken and may be the safest way to go.   

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On 6/29/2017 at 1:31 PM, FDNY said:

So if he had an office building and used it for 35% business you would depreciate that portion less the appropriate land value.  So would you depreciate 35% of the boat less a salvage amount? 

Well, that's what I had in mind.  

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On 6/29/2017 at 1:34 PM, cbslee said:

Are you saying that this boat never leaves the dock ?

Never!  After purchasing the boat, he found out it was not seaworthy.  The previous owner had made some modifications that made it top-heavy.

He had had the boat appraised prior to purchasing it and bought it at a discounted price thinking he had a deal, but when he found out that it was not seaworthy, if were to sell it now, he would lose $100K.  I wonder if there was some collusion between the appraiser and the seller.  Hmmm!

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4 minutes ago, Max W said:

I wonder if there was some collusion between the appraiser and the seller.

I would pursue a lawsuit against the appraiser. But this raises an interesting point. When you place an asset into service for depreciation, you have to use the lower of cost or FMV.

And then you can only use 35% of that lower number to depreciate.

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It appears that the boat is NOT used for any purpose other than for business, therefore why would it not be a 100% deprecation asset and business deductible?  It appears to me the whole boat is his office or business.  If you treat it as personal property you will keep the taxpayer from recognizing a deductible loss if sold.

 

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just wondering how this comes into play:

 

What Can I Deduct?

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business. An expense does not have to be indispensable to be considered necessary.

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3 hours ago, OldJack said:

It appears that the boat is NOT used for any purpose other than for business, therefore why would it not be a 100% deprecation asset and business deductible?  It appears to me the whole boat is his office or business.  If you treat it as personal property you will keep the taxpayer from recognizing a deductible loss if sold.

 

But the unused part is not used for business, so it is personal use, even if it's not used for wild parties.

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31 minutes ago, Abby Normal said:

But the unused part is not used for business, so it is personal use, even if it's not used for wild parties.

Sure it is!  Using your theory a stand alone insurance business building could only deduct where their desk were located in the building.  Please tell what personal use when the "taxpayer" said the boat was purchased for business use, or did he say only his desk was for business?  Maybe you are only thinking office in the home deduction?  Its not a home.

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It was originally purchased for pleasure, but it wasn't seaworthy, so the owner decided to use part of it for his office. If I bought a 100,000 square foot office building but only used 800 square feet for my office, the IRS would say (and I would agree) that I could not depreciate the whole building because it doesn't meet the 'necessary' test of 'ordinary and necessary'.

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On ‎6‎/‎27‎/‎2017 at 6:10 PM, Max W said:

Client purchased a 62 foot boat this year to be used exclusively for his office (Sch C).

 

@Abby Normal: Read the original post.  Is it your opinion that the taxpayer did not intend otherwise?

 

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