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LLC to own boat

Old 10-09-2007, 11:49 AM
  #31  
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Fire the CPA and the lawyer. They are not looking out for your best interest - only their own fees.

1) Every year you will have to pay to have the LLC's tax return prepared = more accounting fees

2) When you get caught - JACKPOT!!! - you will pay way more to your attorneys and accountants in fees then you ever would have saved in the original transaction.

Its a win win for the attorney and CPA's, but a lose lose to you. IMO - they should be shut down.
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Old 10-09-2007, 02:28 PM
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I do understand, however when you called BS on me I spoke directly of Florida. there are many other states where I am sure this applies.

The way I originally explained this:

You set up and own ABC inc. as a Sub Chapter S corporation.

ABC Inc. buys boat X and PAYS THE TAX.

When you want to sell boat X, you sell ABC Inc., of which there is no tax. The boat is still registered to ABC Inc. so there are no transfer fees whatsoever in Florida. The difference is the stock of ABC Inc is now owned by someone else. the side effect of this is you can easily split boats among more than one owner based on stock percentages.

And once again, from a straight liability standpoint, any lawyer worth his fee will get past the shield. Just get good insurance.
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Old 10-09-2007, 05:07 PM
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Originally Posted by TexomaPowerboater
2) When you get caught
Dude, chill. mack already said he isn't trying to avoid or evade any taxes. Just trying to avoid personal litigation. And on that note I agree there's nothing that will stop that.

No matter what the ownership structure of the boat, the operator would most likely be named as a defendant in the lawsuit. Besides paying for insurance, the way to protect your other assets is to put THOSE under a different ownership structure than the entity/person conducting the "risky business"...
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Old 10-09-2007, 08:15 PM
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Originally Posted by VetteLT193
The way I originally explained this:

You set up and own ABC inc. as a Sub Chapter S corporation.

ABC Inc. buys boat X and PAYS THE TAX.

When you want to sell boat X, you sell ABC Inc., of which there is no tax. The boat is still registered to ABC Inc. so there are no transfer fees whatsoever in Florida. The difference is the stock of ABC Inc is now owned by someone else. the side effect of this is you can easily split boats among more than one owner based on stock percentages.
I'm trying to see the light of this transaction, but I just don't see it.

ABC buys boat X and pays the tax. ABC records the boat at cost, then they depreciated the assets because thats what you do when LLC's acquire assets. So ABC gets a depreciation dedution which flows through to the owners tax return. Effectively depreciating a boat. Or say they don't depreciate it and the boat is driven for a few years and he sells the company with the boat being the only asset. Obviously the boat will sell for less than what it cost, which creates a tax loss which flows through to the owners individual tax return. Effectively deducting a loss on the sale of a boat.

Handfulz28 - I am chilled - I just don't want this guy making mistakes. Unless your talking about trust - you lost me. You said there is nothing you can do to avoid personal litigation even with an LLC and most people here agree, but you still think you should set up different ownership structures for a boat?

From my point of view the guy goes into his attorneys office and says "I'm going to buy a fast boat, so I need to protect my assets if anybody gets hurt." A regular person would say - OK just get some really good insurance, but the lawyer doesn't get any fees for that and decides to set up a sham transaction, whereby he gets his fees and possibly even more down the road if it goes bad.

Last edited by TexomaPowerboater; 10-09-2007 at 08:32 PM.
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Old 10-09-2007, 09:48 PM
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Sorry Texoma, I missed a smilie or two, so I was a little more lighthearted than it came across. And I certainly appreciate and agree with your effort to both be legal and not get shammed by an attorney.

Now I'm no tax expert and I've only been involved in this stuff from a large corporate level. But from my menial understanding of taxes, there's no code, no law, that REQUIRES you to take a deduction or show a loss at any point during the existance of the LLC. GAAP and IRC have a detailed framework for ALLOWING deductions, but not requiring them.

As for ownership structures, the idea would be to place OTHER assets under different ownership than the boat and operator to place them out of the reach of litigation for liability associated with the boat. Of course a trust in one of the various forms is common.

So for different reasons, i actually agree with you Tex, that the LLC to insulate against litigation is more headache than it's worth...and not guaranteed to be effective. I don't think a living/charitable trust that owned the boat would help much either.

Best you can do:
1. A good insurance policy
2. Be a responsible boater
3. Know the people you bring on board; have the difficult discussion "would you sue me if I hurt you?"
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Old 10-09-2007, 10:22 PM
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Thanks guys for all of the discussion.

In the world we live in, a person can't be too cautious. I work extremely hard for what I have today, and just want to protect it. I am currently taking bids on the insurance policy for the boat with an umbrella add on.

I do not plan to act or drive crazy, race, or do anything stupid in the boat, but you just never konw what may happen. If an accident happens, I want to know that I did everything in my power to protect myself and my family's assests.

I guess I worry too much about bad things happening, but in business I see it too often. I guess I have lost faith in most of the public. You never know who may sue you, and over what.

I could tell you stories of people chasing down our company vehicles to attempt suits. In one city, a woman hit herself in the head with a ball peen hammer, went to the ER and claimed a rock flew out of a tire on one of my crew trucks and struck her in the head. I had trucks in the city, but none on the street she named, but no way to prove. She sued, and insurance paid off without trial.

I think Insurance companies like paying off these claims instead of fighting so they can charge me more every month in premiums.

I have to stop, I am getting myself worked up!!

Can't wait to get the boat to LA
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Old 10-10-2007, 08:31 AM
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Originally Posted by Mackattack

Can't wait to get the boat to LA
Can't wait to see the boat if its worth setting up an LLC for.
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Old 10-10-2007, 01:16 PM
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OK guys, while we're on the subject. What about listing a boat as an assett of an existing S-Corp that IS a legit business and IS making money. My CPA said it wasn't a good idea and asked me this; "How are you going to justify this S-Corp needing a 38 foot Cigarette?" I know of several friends that have their boats in the name of their company (LLC or Corp) and write off the maintenance and the use for entertaining clients etc. Are they flirting with the IRS or is this a "legal" thing to do? I'm sure I'm opening a can of worms here but fire away!
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Old 10-10-2007, 02:08 PM
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Croozin2...if you have a customer that would testify in court that his ride in your boat contributed to him doing business with you, then pursue the effort to take that use as a deduction.
Does it have to go that far? No. But that's pretty much the final hurdle that would prove it was a legitimate, "allowable" deduction. I'm sure people put their business name on their wife's car, which never sees the light of a customer, and deduct it as a business expense. The trick/fatal flaw is what category of expense it goes under...
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Old 10-10-2007, 06:48 PM
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Originally Posted by Croozin2
OK guys, while we're on the subject. What about listing a boat as an assett of an existing S-Corp that IS a legit business and IS making money. My CPA said it wasn't a good idea and asked me this; "How are you going to justify this S-Corp needing a 38 foot Cigarette?" I know of several friends that have their boats in the name of their company (LLC or Corp) and write off the maintenance and the use for entertaining clients etc. Are they flirting with the IRS or is this a "legal" thing to do? I'm sure I'm opening a can of worms here but fire away!
Yes, you would be flirting with the IRS if you have a business and you just decided to buy a boat through the business for entertainment. The asset needs to be ordinary and reasonable in the normal course of business. Unless your business has something to do with boats, then it is not legit.

BUT - I would recommend a couple of other options.
1) If you are entertaining a client on a boat ride I don't see anything wrong with deducting as entertainment the cost of gas, booze, but not the whole boat.
2) If you are in a poker run and you promote your business as a sponsor in the poker run, then I don't see anything wrong with deducting all the expenses of the poker run. Maybe even slap on a vinyl banner of your business. That would be more like advertising or business promotion rather than entertainment, of which 50% is disallowed.
3) If your OSO Steve - then you've got it made and katy bar the door for all business/boating assets and expenses.

I remember Flash Gordon used to offer rides for a fee on his 180mph turbine eliminator and he had a business set up for all the poker runs he sponsored. I'm willing to bet he deducted all that stuff, which is 100% legal. But in the end - I don't think he escaped any personal litigation.

Last edited by TexomaPowerboater; 10-10-2007 at 10:53 PM.
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