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tax benefits?
Last Post 02 Sep 2017 06:03 PM by rrle. 2 Replies.
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chuck001User is Offline
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chuck001

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10 Aug 2017 10:26 AM
    I own a carpet cleaning and tile/grout cleaning business as a one man show.  Profit margins are large and if you aren't careful, Uncle Sam will eat you up on April 15.  I will be entering the market in the near future for a boat and would like to find a way to put it in my business.  Are there any added benefits of making it a CGAUX facility?  I know putting a boat or anything perceived as a "toy" in a business will draw attention from the IRS.  I do have a 100 ton so chartering would be justified and doable to show income.

    Thanks folks..
    VicNaz1User is Offline
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    VicNaz1

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    01 Sep 2017 09:19 PM
    First off, you need to become an Aux.
    Then you need to train so you can contribute as a staff officer or crew member, etc.
    If that works out you can outfit your vessel and submit it to be accepted as a Auxiliary facility.

    That represents a significant investment of effort on your part. If you think that's worth it than the up-side does include some financial incentives. Some states like Maryland provide income tax deductions for Aux. if they contribute enough to qualify (holding office, going out on missions, etc.).

    Other incentives include the cost of outfitting and maintain your vessel for assignment to duty. This can include some equipment and activities associated with preparing it for use as an actual Coast Guard asset as an Aux. Facility. This is not trivial but it's not BIG dollars either. You really need to speak with a tax and accounting professional to work out these details.

    It boils down to the fact that the IRS considers Aux. to be unpaid employees of the Coast Guard so activities (mileage, expenses, equipment, uniforms, etc.) are unpaid employee expenses and a portion of the costs associated with a vessel could theoretically be deducted. I am not a legal, tax or accounting professional but it could probably be argued that if your vessel is under way for a total of 100 hours each year and 25 of those hours are used as an Auxiliary Facility under legitimate Coast Guard orders it might be considered reasonable to deduct 25% of the yearly cost of maintaining, docking, etc. it. Then again, maybe not.

    Tax pros know this stuff better than I. Maybe speak with a local Volunteer fireman also and see what he does. Most states and the IRS seem to regard us the same as Vol. Firemen.
    rrleUser is Offline
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    rrle

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    02 Sep 2017 06:03 PM
    The answer depends on what type of business structure you have. If you are a 1040 Schedule C Sole Proprietorship, the answer is no. Schedule C businesses are supposed to have only one type of business or function. It would be hard to prove that a boat charter business and a tile business are closely related to count as one business.

    I have a friend who did what you are thinking about. He had merged his boat (45') charter business with his computer consulting business. He was incorporated as a S-Corp and his organization paperwork stated the business purpose to be "any lawful purpose". He was audited and fought the IRS for years and eventually won. I wonder if the pain, agony and worry of the many years fight was worth it - given that he wouldn't have had the trouble with two businesses.

    Deducting a part of the boat as a charitable contribution is a whole 'nutter can of worms. You would need to keep a log of all your use (personal, Aux and business) and only deduct the portion that is allocable to the Aux.

    FWIW - I am an Enrolled Agent and do taxes year round for a living. This is not a solicitation for clients - I already have enough.
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