Boat purchase as entertainment business expense

[ed_accountant]

Hi,

I have a client that wants to purchase a boat for his business for advertising and entertainment purposes. His business has nothing to do with boating or water travel.

If it was for entertainment purposes would it be 50% business use thus depreciation 50% deductible?

Any comments regarding fully non-deductible ?

I am researching this prior to responding to my client... Thanks

[Maribeth]

The boat itself is a non-depreciable item. The expenses incurred on the boat for business purposes would be deductible, subject to the 50% rule.

Maribeth

[TAXBILLY]

A boat would be considered an entertainment facility and expenses such as depreciation and operating costs are not deductible.

However out-of-pocket expenses provided during the entertainment, if ordinary and necessary, are deductible.

See Pub 463, page 13:

http://www.irs.gov/pub/irs-pdf/p463.pdf

taxbilly

[ed_accountant]

Thank you Maribeth and Taxbilly !

[Daune/CA]

Years ago I had a client that used a boat for business purposes. He was in the insurance business, and any potential agents he would take for a weekend on the boat, with their spouse or significant other. He stated that it gave you an indication as to who the person really was when in that environment. People let down their guard on the water in a boat and you see then as they really are. It worked very well for him. In those days there were not the entertainment limitations that are prevelant today. His boat expense survived two audits with NO adjustments. Don't know how it would fare in today's tax world.

Today we have progress :)

[kcjenkins]

In today's tax world, it would not float. The Congress, in it's wisdom, decided that there would be NO depreciation allowed on boats used for entertainment. A commercial fishing boat or cruise ship or ferry, are the only boats you can depreciate.