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Go Back   WakeWorld > >> Boats, Accessories & Tow Vehicles Archive > Archive through July 21, 2006

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Old    darren (bigbird1031)      Join Date: Jun 2006       07-10-2006, 9:04 PM Reply   
will a porta pottie and a one burner stove qualify for the IRS 2nd home deduction??????????????????????????
Old    T (tbonus)      Join Date: Oct 2005       07-10-2006, 9:29 PM Reply   
I think you need fresh water supply to call it a 2nd home. My tax guy said the x-80, which has fresh water tank and a head, would quali.
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-10-2006, 10:24 PM Reply   
You probably need sleeping quarters for it to qualify as a "dwelling" under IRC 280A(f)(1)(A). The chief requirement is that the owner must stay in the dwelling 14 days out of the year. The Tax Regulations don't specifically mention it and i couldnt find any cases directly on point. However, in a tax court ruling regarding a "mini motor home" the court stated soime guidelines for whether a motor home is a dwelling: if it "provides a shelter and accommodations for eating and sleeping."

The main things you would need is a berth to sleep in, a head, and cooking facilities. It doesn't have to be confortable, in fact is can be pretty spartan.

The X-80 would a a SEVERE stretch in my opinion and you'd be screwed in the event of an audit. Then again, i guess you could argue that you could sleep up front, pee over the side, and cook on the intake manifold :-)

See the article at this link, it explains it pretty well. http://seattlepi.nwsource.com/local/199197_boatshome11.html

DKJ
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-10-2006, 11:22 PM Reply   
DISCLAIMER: Nothing in my previous post should be considered legal advice, and no act should be taken based upon reliance on the information contained in said post. I am not a licensed attorney and must advise you to consult an attorney licensed in your jurisdiction.

(Message edited by dkjbama92mariah on July 10, 2006)
Old    T (tbonus)      Join Date: Oct 2005       07-11-2006, 9:04 AM Reply   
Derek - don't pee over the side, pee in the head, that's what it is for.
Old    C.I.E..... Evan (guido)      Join Date: Jul 2002       07-11-2006, 9:09 AM Reply   
Get a snap on bow cover and rig up one of those boat bbq's that attach to the gunnel and you've got a fully functional second home. They've even got a sink and cooler. You're dialed.
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-11-2006, 9:30 AM Reply   
Yikes, the Commissioner (of the IRS) would have a field day with Evan's idea.

Tbonus, a head wasnt even a dream when my boat was made in '92. However, i have been known to relieve myself into the bilge on really cold days. Exhaust manifolds are nice and warm :-)
Old    T (tbonus)      Join Date: Oct 2005       07-11-2006, 9:30 AM Reply   
Sounds to me from the informative article provided by Derek J that many people are taking advantage of a simple porta pottie and portable stove in boats for a 2nd home tax deduction.

I suggest asking your tax person for clarification though.
Old    Paul (psudy)      Join Date: Dec 2003       07-11-2006, 10:22 AM Reply   
I think it all comes down to whether the boat is Yacht certified. If it is, it can be considered a second home(yacht). If it is not and you have a toilet, you would not want to get audited.

(Message edited by psudy on July 11, 2006)
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-11-2006, 10:49 AM Reply   
Paul,
I know i'm just a lowly newbie here, and don't want to step on the toes of a vet, but i must query you at least to satisfy my own curiosity.

Does your assertion above regarding "yacht" certification have any basis in the Internal Revenue Code, Treasury Regulations, or a Tax Court case. I ask because i dug through the IRC, the regs and read several cases last night, and i couldn't find anything directly on point.

The only direct authority i found is in the Internal Revenue Code. 26 U.S.C.A. 280A(f) provides: "... The term "dwelling unit" includes a house, apartment, condominium, mobile home, boat, or similar property, and all structures or other property appurtenant to such dwelling unit."

The only clarification that i could find of the definition of "boat" for these purposes was in the tax court case i discussed in my previous reply. In my research, i never came upon the term "yacht certified."

Again, i'm not trying to break your balls, but it would be great if you could provide a citation to a binding authority that supports your conclusion.

Cheers,
DKJ
Old    Paul (psudy)      Join Date: Dec 2003       07-11-2006, 11:44 AM Reply   
Derek,
I do not disagree with your previous post. I am just pointing out that if your boat is yacht certified and you do get audited, you just have to point them to the certification. They would have a hell of a time proving that you have not slept on your boat for 14 days to satisfy the requirement. I believe to be yacht certified you have to be a minimum of 28ft, and have a toilet and a sink. I have not heard of the stove requirement before that article you posted. I will look farther into it when I get some extra time and let you know what I find.
Old    John (summerobsession)      Join Date: Jun 2005       07-11-2006, 12:57 PM Reply   
IF the tax/registration law is similar to what is considered a motorhome (I realize that is a BIG if), then to be legally considered and registered a motorhome/RV (at least in KS), then you need toilet facilities (no mention of permanently installed, but better if it was), cooking facilities (can be a portable propane unit), and shelter.
Unless you could build a hard top structure to sleep under, this would be the tough part of convincing anyone a wake boat could be a second home.
Regarding larger boats, anything over 27 feet can be Coast Guard registered, and would most probably help the case as well.
just my .02 from personal experience, not actual knowledge of the law.
Old    Ken Novotny (knwebs)      Join Date: Sep 2005       07-11-2006, 1:00 PM Reply   
I asked my accountant and she said that it must have a built in toliet in order to qualify as a write off for my business. Now, to qualify, I'm not sure what category of a write off she meant that to be. I told her I "entertain" clients on it. Since mine doesn't have the toliet, of course, I didn't get to use that route. However, she set me up with a way to rent it to myself for a monthly charge. Now on the income side you'd think it would be a wash but it's not because you don't pay all the taxes deducted out of your paycheck if you rent it to yourself. My accountant worked for the IRS auditing people for 18 years before she started her own agency and I'm VERY pleased with the way she knows how to play the game. I'm not saying this would work for everyone but just passing along the info my accountant gave me. I think it only saves a few % actually but that's fine with me!
Old    JohnE (amazongb)      Join Date: Jul 2005       07-11-2006, 2:42 PM Reply   
Ken,

Is your business a c-corp, s-corp, llc or sole proprietor?

If I'm understanding your post correctly, the business owns the boat and you pay the business rent to use it. Correct?
Old    Jeff Walker (surfdad)      Join Date: Sep 2004       07-11-2006, 5:14 PM Reply   
Sheesh - what a mess :-)

Under IRC section 163 (h)(2) a taxpayer may decuct any qualified interest on a qualified residence, which is defined as a principal residence and one other residence owned by the taxpayer for purpose of deductibility for the tax year. IRC section 163 (h)(3) defines qualified residence interest as any interest which is paid or accrued during the tax year on acquisition or home equity indebtedness with respect to any qualified residence of the taxpayer. In accordance with IRC section 163 (h)(4), a boat will be considered a qualified resdence if it is one of the two residences chosen by the taxpayer for purposes of deductibility in the tax year as long as it provides basic living accommodations such as sleeping space (berth), a toilet (head), and cooking facilities (galley). If the boat is chartered out (rental) and ONLY if, the taxpayer will have to use the boat for personal puposes for either more than 14 days or 10% of the number of days during the year the boat was actually rented, in accordance with IRC section 280A (d)(1).
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-11-2006, 8:36 PM Reply   
Thanks for the clarification Paul. Jeff, you explained it a little better than i could. I just realized how bad of a tax nerd i am considering have 3 abridged copies of the IRC: one in the car, another on the coffee table, and another in the office. Maybe i should get out on the water more often. My brother has his LLM in tax from Washingtion University in St louis, i'll have to ask him what he thinks next time i see him.

DKJ
Old    Jeff Walker (surfdad)      Join Date: Sep 2004       07-11-2006, 8:48 PM Reply   
It's funny, Derek, you would think that with tax law there would only be one interperation, but...there isn't. In the specific question above, I would recommend against a client of mine taking such a deduction, but I would be HAPPY to represent anyone trying it in an audit. My retainer, per year, would be a mere $2,000. :-)

Darren, be sure to keep my email add'y handy. :-)
Old    Dirty D (dkjbama92mariah)      Join Date: Dec 2005       07-11-2006, 9:21 PM Reply   
Very well said Jeff. I was actually suprised that i couldnt find a case on point. I don't know HOW i overlooked it last night, but i found the Treas Reg that at least gives some guidance. 1.280A-1(c)(1), which you quoted in your post this afternoon: "...which provides basic living accomodations such as sleeping space, toilet, and cooking facilities."

It would make an interesting case for the tax court. Makes me wonder how many members here may have actually slept in their new boat in the garage the night they brought it home.
Old    Jeff Walker (surfdad)      Join Date: Sep 2004       07-12-2006, 6:28 AM Reply   
Derek, there is a case...I'm out of my office for the rest of the week, but it comes in the back door, referencing the nondeductibliity of "prescribed" hot tubs as a medical expense if they are permanently attached to the property. The permanency is what establishes the "boat" as a home.

I'm not claiming it's authority, but this is the "deal" as quoted by Quicken, thru Yahoo Finance:

http://www.quicken.com/cms/viewers/article/taxes/53578

Is the Vacation Home a Qualified Residence?

To take a mortgage interest deduction for a vacation home, the home must be a qualified
residence, which means that it must have a permanent toilet and facilities for sleeping
and cooking. This is usually not a problem for a cabin in the mountains, but for
recreational vehicles and boats, this can be a tough test to pass.

Example: You buy a new 20-foot motorboat and finance it through the dealer. The boat has
a cabin with a sofa that pulls out into a bed, and a small refrigerator. It does not
qualify as a vacation home because it doesn’t have permanent cooking and toilet facilities.
The interest on the boat loan is non-deductible personal interest.

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